Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

Oral Answers to Questions — POSTS AND TELECOMMUNICATIONS

Broadcasting (Inquiry)

Sir G. Nabarro: asked the Minister of Posts and Telecommunications whether he will now set up a commission to inquire into the charter and finances of the British Broadcasting Corporation after 1976.

Mr. Whitehead: asked the Minister of Posts and Telecommunications if he will now announce his decision relating to the holding of an inquiry into broadcasting.

Mr. Golding: asked the Minister of Posts and Telecommunications whether he will now establish a committee of inquiry into broadcasting.

Mr. Moate: asked the Minister of Posts and Telecommunications if he will now set up a commission to inquire into the method of financing the British Broadcasting Corporation.

The Minister of Posts and Telecommunications (Sir John Eden): The Government's reply to the report on the IBA from the Select Committee on Nationalised Industries is now available in the Vote Office. Its main conclusions are that there should be no general inquiry into broadcasting at the present time; that the Television and Sound Broadcasting Acts and the BBC Charter should be extended until 1981; and that an independent study of the coverage of the broadcasting services in Scotland, Wales, Northern Ireland and rural England should be commissioned forthwith.

Sir G. Nabarro: While commending my right hon. Friend on his solicitude in providing me with a copy of the White Paper a few seconds before he replied, may I ask him two questions? First, has he omitted altogether any reference to a further delination and definition of the word "offensive" in the context of broadcasting generally and television in particular? Secondly, what provision does he propose to make for the mounting losses of the BBC, which I am told will amount to a sum of not less than £25 million by the year 1976?

Sir J. Eden: On the first point raised by my hon. Friend, he will be aware that the actual form of the programmes and their content is the direct responsibility of the respective chairmen and governing bodies of the two broadcasting authorities. The second point relates to a different question.

Mr. Whitehead: Is the right hon. Gentleman aware that his answer will be seen here today as a rebuff to the recommendations of the Select Committee of this House? Is he further aware that a statement of this magnitude should have been made as a statement to the House after Questions—with no disrespect to the important statements that are to be made at 3.30 p.m.?
Will the Minister tell us a little more about his reasons for rejecting not merely Recommendation No. 29 of the Select Committee but the recommendation of almost all other interested bodies in broadcasting that there should be an inquiry?
Will the right hon. Gentleman also say something about the reasons why he is so vague, in the document which we have just received, about the future of the fourth channel—the so-called ITV 2—and say whether the companies are to be allowed to go on with extended contracts under the Television Act, itself extended to 1981?

Sir J. Eden: The Television Advisory Committee recently reported, indicating that new technical developments were unlikely to have a major impact on the structure of broadcasting before the early part of 1980s. That is one reason why this decision to extend the franchise has been taken. Secondly, a new Chairman of the BBC has just been appointed. Thirdly, as the White Paper notes, the


question of the fourth channel is the subject of separate study, and conclusions will be brought before Parliament when that has been concluded.

Mr. Moate: Will my right hon. Friend confirm that the effect of the White Paper is to say that no changes will be proposed in, or that there will be even a review of, the specific question of the financing of the BBC? Does he not agree that there is a case for a specific review of this subject, as the licensing system is discredited, very unpopular and expensive to administer?

Sir J. Eden: The licensing system is a separate matter. As I indicated in answer to my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro), there is a later Question on the Order Paper relating to this matter. However, I can say that the decision not to have a general inquiry does not prevent any other decisions on this or any related matter being taken before 1981. This matter does not rest upon the decision about a general inquiry.

Mr. Golding: Is the Minister aware that many defects in the present structure emerged during the debates on the Sound Broadcasting Bill, and that many defects in the structure of the IBA emerged during the hearings of the Select Committee? Is he also aware that undertakings were given to reconsider the defects in a committee of inquiry? Will he assure us that the public debate that the Select Committee deemed to be necessary will take place on the allocation of the fourth channel, and will he publish a Green Paper on the subject before the final decision is taken?

Sir. J. Eden: The exact form in which proposals will be presented to Parliament is something which I will decide upon nearer the time when I am ready to present them to Parliament. I have made it clear in the White Paper that the Government intend to put forward their proposals on all these outstanding matters before Parliament is invited to approve the extension to 1981.

Sir R. Cary: On the point about the BBC's finances, is the Minister aware that the television and radio licence fee is still among the cheapest in Europe and that I should hate to see the BBC driven into the position of borrowing money extensively at present interest rates?

Sir J. Eden: I have no proposals before me from the BBC about its finances and, as I think is clear, I have certainly no proposition to put to the House to alter the present licence fee arrangements. But, as I said in answer to earlier questions, the method by which the BBC is financed need not wait upon any general review. It is something which could be dealt with separately.

Mr. John Grant: Is the Minister aware that the White Paper is a tragedy of missed opportunity? It is deplorable in that it flouts quite clearly the central recommendation of an all-party Select Committee of this House, namely, that there should have been a far-ranging inquiry into the future of broadcasting, into access, structure and accountability, quite apart from the technical aspects. Although the Minister says that he is not yet allocating a fourth channel, it is clear from the White Paper that that channel will be allocated without the benefit of having had that inquiry, and that is crucial. Will he give us an assurance on that?
At a time when broadcasting and television are becoming of increasing social and political significance in this country the Minister appears to be excluding the opinions of the viewing public and interested parties generally. Is he aware that he and the Government are saying to them "Take it or leave it; we know what is best for you"? Will he tell us what Parliamentary opportunity there will be to debate this matter fully?

Sir J. Eden: I am aware, of course, that hon. Members who put forward certain recommendations through the Report of the Select Committee on Nationalised Industries will be unhappy that all their decisions have not been accepted, and that this particularly important one has not been adopted by the Government. I understand that. It is not a case of flouting. The Government carefully considered all this—and it must be a matter on which the Government decide. It is a decision for Government, and not for the Select Committee. I can assure the hon. Member that no decision has been taken about the fourth channel—not even that it shall be allocated. So it is still wide open. It is one of the matters which, again, are reserved for Government decision.
Thirdly, the question of taking into account the views of individual members of the public or representative organisations gives me the opportunity to emphasise that there will be a chance for them to make their representations both to the independent study on all aspects of coverage and to me on matters relating to the fourth channel and about how viewers' opinions can best be represented.

Mr. Speaker: Order. We must move on.

Mr. Russell Kerr: On a point of order, Mr. Speaker. May I know why the Chairman of the Select Committee was not called to ask a supplementary question on a matter of this importance.

Mr. Speaker: It is a matter for my discretion. We have spent 10 minutes on this subject and there were four Questions put down by other hon. Members.

Mr. Russell Kerr: Outrageous.

Television Reception

Mr. Costain: asked the Minister of Posts and Telecommunications whether he is satisfied with the television reception in the Folkestone and Hythe area.

Sir J. Eden: Reception of the VHF services is good but there are a number of small areas where reception of the UHF services is not entirely satisfactory.

Mr. Costain: Will my right hon. Friend advise me what I should tell those of my constituents who complain that when they ring the BBC they get no satisfaction? May I remind him that this complaint is in addition to the complaint about radio interference from taxi services in the Folkestone area? Can he not make a helpful suggestion as to what may be done to improve the service?

Sir J. Eden: The BBC is considering plans for a relay station for Hythe, but little can be done for such areas as Folkestone because frequencies are scarce and suitable sites for relay stations in urban areas are difficult to find. The answer must lie with viewers to install as elaborate receiving equipment as may be necessary for their purposes.

Mr. Wall: asked the Minister of Posts and Telecommunications what

complaints he has had about television reception in the Hull area of Yorkshire.

Sir J. Eden: I have received no complaints.

Mr. Wall: Is my right hon. Friend aware that the IBA intends to deprive Humberside of the privilege of receiving Anglia Television programmes? Has he not had complaints from hon. Members, chambers of commerce and local authorities about this? Is he further aware that the high-handed and bureaucratic action of the IBA will not be tolerated? Will he bring this strong feeling to the notice of the chairman?

Sir J. Eden: I have received complaints about the point my hon. Friend raises. As I think he knows, these have already been brought to the attention of the Chairman of the IBA. Matters of coverage could most certainly be taken into account by the independent study to which I have referred in connection with questions on the White Paper.

Mr. James Johnson: Is the Minister aware that the Humberside area has perfect coverage from the Anglia studios, which is what it wants? I do not challenge him on this point, but will he find out whether there is a single dissentient voice in the whole of eastern England which says that Anglia Television should not continue to serve the people of Humberside and Lincolnshire?

Sir J. Eden: I do not dispute the point which the hon. Gentleman makes. I am merely emphasising that this is the responsibility of the Independent Broadcasting Authority. The independent study which I announced in the White Paper could well look into the question of coverage in this part of the world.

Mr. Jeffrey Archer: Is my right hon. Friend aware that Anglia has made a film on this subject, which has been confiscated by the IBA, and that we, as Members of Parliament representing our area, have been told that we may not see it? Is he allowed to see that film?

Sir J. Eden: That is entirely a matter for the IBA.

Mr. Archer: Because of the unsatiscactory nature of that reply, I beg to give notice that I shall seek to raise this matter


on the Adjournment at the earliest opportunity.

Postal Coding

Mr. Ewing: asked the Minister of Posts and Telecommunications if he will give a general direction to the Post Office to ensure that the postal coding system operating in Great Britain is widely publicised in the other EEC countries.

Sir J. Eden: This is a matter for the Post Office, and a general direction would not be appropriate.

Mr. Ewing: Is the Minister aware that he is being unduly complacent on this point? Is he also aware that there have been serious difficulties in this country in getting consumers of Post Office services to use the postal coding system? There is a widely-held view in this country that the system should be scrapped altogether. Is it not therefore necessary for the Government to give a direction to the Post Office to make sure that European countries at least understand our postal coding system, otherwise there will be a serious breakdown which could then only be the responsibility of the Minister?

Sir J. Eden: The question underlines the importance of concentrating publicity in this country first, especially as internal mail constitutes about 95 per cent. of all mail delivered in this country.

Mr. Edward Taylor: Has my right hon. Friend any indication of the percentage of people who use postal codes?

Sir J. Eden: No. I do not know whether that figure could be obtained. If it can I shall send it to my hon. Friend.

Mr. George Cunningham: Does the Minister agree that the present British postal code is the most unmemorable jumble of figures and letters that it is possible to devise? Will he have an informal word with the Post Office to try to get it to switch over to something more akin to what is used in Europe, which is more likely to encourage public use of it.

Sir J. Eden: The form of the postal code is a matter for the Post Office. It is its responsibility. It devised the system to ensure speedier delivery of mail. It is a system which, after very careful

study by Canada, is now being adopted by that country.

Broadcast Programmes (Complaints)

Mr. Fowler: asked the Minister of Posts and Telecommunications whether he will now introduce an independent element into the handling of complaints from the public against broadcasting organisations so that members of the public can appeal to an independent body.

Sir J Eden: No, Sir.

Mr. Fowler: That is a deeply unsatisfactory reply. Have not other Government Departments accepted the case for an independent review of complaints from the public? Is not the latest sign of this the Home Secretary's announcement about complaints against the police? On what grounds should broadcasting organisations be exempt from such a check?

Sir J. Eden: My hon. Friend was asking whether I would now introduce this independent element. As he is well aware, there is already a Programme Complaints Commission and there is the IBA's Complaints Review Board, both of which now provide some independent element. My hon. Friend will also have noted that I am discussing with the chairmen of the BBC and the IBA ways in which the viewers' interests can better be represented.

Mr. Robert Cooke: Will my right hon. Friend explore a way in which there could be fewer complaints? Notwithstanding the extension to 1981 of the BBC Charter and the other companies, if there were more channels long before then there could be a greater variety of views broadcast and there would not be the same reason for complaint that there is now.

Sir J. Eden: That is a view held by my hon. Friend which I respect. But the matter is one primarily of the method of representation and the extent to which views are taken into account by those responsible for the content of programmes.

Mr. William Hamilton: There is a very widely held view that we probably have the best broadcasting organisation in the world, envied by almost every other


country in the world. Will the Minister say how many complaints are received by the organisations, on average, each week or each month as a proportion of the total number of viewers or listeners?

Sir J. Eden: I cannot answer the hon. Gentleman. If I can obtain the information I shall send it to him. But it is primarily a matter for the broadcasting authorities. What the hon. Gentleman says about the quality of broadcasting services in this country is absolutely right, but I am sure that neither he nor any other hon. Member would expect us to be complacent about that. It is the need to continue to observe high standards and quality in programmes that obviously he and others have in mind.

Giro

Mr. Rost: asked the Minister of Posts and Telecommunications how many new National Giro accounts have been opened since the recent increase in charges; how many accounts have been closed; and what has been the effect on the current trading deficit.

Sir J. Eden: Information of this kind is normally published in the Annual Report and Accounts but the Post Office published figures in October last showing that the number of accounts had risen then to 465,000.

Mr. Rost: Is my right hon. Friend aware that there have been substantial increases in service charges since then, and that the East Midlands Electricity Board claims that there has been a drop of 25 per cent. in the number of customers paying their bills by National Giro since those increases? Is my right hon. Friend satisfied that the Giro service is still competitive?

Sir J. Eden: Giro balances have increased by 20 per cent. Its weekly turnover has increased by 25 per cent., and agents' deposit business has increased by about 50 per cent. That indicates a movement in the right direction. I am sure that my hon. Friend will agree that the profitability of Giro does not depend on the number of accounts alone. Other aspects and factors are just as important.

Mr. Bruce-Gardyne: Can my right hon. Friend assure the House that he has not weakened in any way on the obligation placed by his predecessor on the Giro

to make a positive contribution to Post Office finances within a year of the increase of tariffs? Will that objective be achieved?

Sir J. Eden: I remain steadfast on the subject, with the active support of my hon. Friend, and have not weakened on the objective set for Giro.

Mr. Gregor Mackenzie: Is the right hon. Gentleman aware that Opposition Members at least are delighted to hear about the progress of the Giro? May we press him a little further, as we have often done in the past, to try to persuade many more local authorities to use Giro, and certainly to persuade more Government Departments to use it?

Sir J. Eden: I am certain that the hon. Gentleman does not want me to feather-bed Giro, but expects it to stand on its own feet and compete.

Television Licence Fees

Mr. Sydney Chapman: asked the Minister of Posts and Telecommunications if he will publish a White Paper setting out the reasons for his recent decision not to alter the present system of television licence fees.

Sir J. Eden: I would refer my hon. Friend to the debate on 21st February. I doubt whether this would be a suitable subject for a White Paper.—[Vol. 851, c. 488.]

Mr. Chapman: Does my right hon. Friend appreciate that an ever-growing number of the public feel increasing bitterness about the whole system of television licence fees, and that it would be a good thing if he gave the widest publicity to his reasons for rejecting the alternatives? That at least would remove some of the public's misconceptions.

Sir J. Eden: I shall try, with my hon. Friend's help, to give further publicity to the reasons deployed during the debate on the matter. It is a complex subject and, in view of some of the anomalies arising from the way in which the present system has developed, it gives rise to deep-seated emotions on both sides of the House.

Mr. Mayhew: Is the Minister aware that no answer was given in the debate to the question that his hon. Friend


asked? Is he also aware that the collection of the licence fee is very wasteful and costly, that money is lost through evasion, and that six times in the past 10 years the BBC has had to beg Ministers for an increase in the fee? What kind of independence from the Government is that? Is the right hon. Gentleman aware that the BBC is more dependent on the Government under the licensing system than are many universities using general taxation as a source of finance?

Sir J. Eden: The hon. Gentleman put forward views of that kind during the debate, and I then said that I would consider them most carefully.

Public Telephones (Council Flats)

Mr. Atkinson: asked the Minister of Posts and Telecommunications if he will issue a general instruction to the Post Office to establish that priority over private installations be given to the installation of public canopy type booths in residential blocks of council flats.

Sir J. Eden: No, Sir.

Mr. Atkinson: Will the Minister reconsider that answer? As it is very unlikely that every household in the country will have a telephone before the end of the century, is there not a need to give priority to the installation of public telephones, particularly on council housing estates where there are large blocks of flats, many of which have no telephones? Will he ask the Post Office to open discussions with local authorities—first, giving priority to the installation of telephones and, secondly, asking municipal architects to incorporate within their designs provision for public telephones?

Sir J. Eden: That must be a matter for the owners of the premises concerned, because it would add to the cost of the installation. The Post Office would naturally wish to promote the hiring or rental of coin-operated telephones, but it places call boxes in as central a position as it can devise to ensure that large numbers of people have access to them, and therefore that the call boxes are a more paying proposition than they would otherwise be.

Mr. Edward Taylor: Does my right hon. Friend agree that there is a special problem in multi-storey flats? Will he

give an assurance that if a local authority wishes to install public telephone kiosks in the foyer of such flats the Post Office will give them priority?

Sir J. Eden: That is a matter for negotiation between the local authority and the Post Office.

Mr. Gregor Mackenzie: Is the Minister aware that there are two problems associated with the question asked by my hon. Friend the Member for Tottenham (Mr. Atkinson)? First, there is the problem of the number of people in multi-storey blocks of flats who do not have, and cannot obtain, a telephone. There is the allied problem of vandalism in a number of areas. Some of us strongly believe that if there were telephones of the type my hon. Friend suggested in multi-storey blocks of flats, under the care of a caretaker, that would be to the advantage of everyone concerned.

Sir J. Eden: Vandalism is an important aspect, but the House should be under no illusion about the cost of installing hooded or other telephone boxes in separate blocks of flats. Not only would there be an additional £5 connection charge and £10 annual rental, but the hoods would cost about £25 each.

Telephone Kiosks

Mr. Horam: asked the Minister of Posts and Telecommunications what progress has been made to date in providing public telephone kiosks which are vandal-proof.

Mr. Edward Taylor: asked the Minister of Posts and Telecommunications how many public telephone kiosks are located in the United Kingdom; and what number of these are out of order in an average day from vandalism, or other reasons.

Sir J. Eden: Of a total of about 76,000 kiosks in the United Kingdom, 54,000 have been fitted with strengthened equipment. The number out of order for any reason in an average day is not known.

Mr. Horam: When will the new vandal-deterring kiosks be the norm throughout the country? What evidence is there that they significantly deter vandalism?

Sir J. Eden: I cannot say when the process of replacement will be completed.


It will inevitably take a considerable time. I said that there was a total of 76,000 kiosks. About 4,000 of the new, improved design are in operation, so it will clearly take some time before the programme can be completed. The recent figures show a reduction in the number of incidents, but it is difficult to read too much into them, because over a period of time they tend to fluctuate.

Mr. Taylor: As my right hon. Friend has agreed that vandalism is a serious problem is it not rather ridiculous that he cannot give an estimate of the number of kiosks out of order on an average day? Surely, it must be possible to give some indication. Does not he agree that one way to reduce vandalism is to have public telephone kiosks in sheltered places, and that the foyer of a multi-storey block of flats would obviously be an ideal place? Will he reconsider the question whether we can help to reduce vandalism and improve the service to the public by having more kiosks in such blocks?

Sir J. Eden: As I said in answer to a previous question, it is a matter for the owners of premises to negotiate direct with the Post Office. I cannot give my hon. Friend the information about the number of telephone boxes out of order because of vandalism or for any associated reasons on an average day.

Mr. Taylor: Why not?

Sir J. Eden: Because it is a vast problem involving the collection of statistics, which it would be out of proportion to seek to have supplied to my Department. Surely my hon. Friend agrees that the best cure for such attacks on the property of the community is improved educational and local community services, to ensure that youths or others do not perpetrate such crimes.

Mr. Kelley: Will the Minister consider advising the Post Office to place a notice on all telephone kiosks pointing out that interference with the telephone could cost a human life? Is he aware that I believe that many people destroy telephones for kicks, and that if the facts of life were brought home to them by such a notice they might be prevented from doing this?

Sir J. Eden: In the light of the questions put to me today I will certainly

discuss with the Post Office ways in which it can take account of the views of hon. Members and improve the safeguards it operates against vandalism.

Television (Road Safety Films)

Mr. Walter Johnson: asked the Minister of Posts and Telecommunications what representations he has received from the BBC concerning the screening of road safety films on television.

Sir J. Eden: None, Sir.

Mr. Johnson: Is the right hon. Gentleman aware that these excellent road safety films shown on Independent Television perform a useful public service? Will he make representations to the BBC asking it to show the films too, so that they get a wider audience?

Sir J. Eden: The BBC broadcasts specific notices which are required for public information but it does not normally repeat advertisements or notices, of whatever kind, which appear on the commercial channel.

Mr. Golding: Why not? Is not the entire question of public information broadcasting one which needs debating in a committee of inquiry? Is it not absurd that we should have to depend on the commercial channel for public information of this sort?

Sir J. Eden: It is a matter of the purchase of peak viewing time. The BBC makes use of many public service announcements as "fillers" outside peak times. It takes the view that its peak time is better devoted to other purposes. Advertising space on ITV is purchased by the various Departments concerned to ensure that a certain message receives maximum attention.

Mr. Tom King: Will my right hon. Friend reconsider this subject? Is he aware that his first answer might seem unconvincing to some who are aware that this House considers that identical party political broadcasts should be carried on both channels? There might be those who consider that road safety should receive equally important treatment.

Sir J. Eden: Under the licence and the agreement with the BBC the Government can already require the corporation to broadcast announcements whenever


requested to do so by any Minister in the Government. It would be carrying that procedure considerably further if we were to require the corporation also to carry full-scale advertisements. I will certainly consider these matters.

Telephone Service

Mr. Bray: asked the Minister for Posts and Telecommunications if he will dismiss the Chairman of the Post Office Board for failing to carry out his statutory duty regarding the provision of a reliable telephone service.

Sir. J. Eden: No, Sir.

Mr. Bray: Will my right hon. Friend accept that the Chairman of the Post Office Board will find that a most reassuring reply? Is he aware that in certain rural parts—and this is since Christmas, of which we have certain memories—telephone communications have been out of commission one day in eight, which is not at all satisfactory? Is he further aware, to refer to correspondence, that the Post Office is using as an excuse for non-delivery of letters within my constituency the suggestion that the letters contained invoices which suppliers did not wish to pay, and that therefore those letters were lost? Does he realise that the Post Office is now recommending that a recorded delivery service should be used to overcome this difficulty.

Sir J. Eden: I am aware of many of the difficulties to which my hon. Friend refers, and also his personal experience in this matter, for which I am extremely sorry. As he knows, these issues are the direct responsibility of the Post Office. I am sure that it is doing its best to provide a satisfactory service.

Mr. English: Instead of spending so much time talking about vandal-proof telephone boxes, will the Minister fix a target date by which everyone in this country can have a telephone, as is the case in some other countries?

Sir J. Eden: This is one of the main objectives behind the substantial additional borrowing permission which the House has authorised for the Post Office. It will develop from the improvement in exchange equipment, plans for which are now well advanced.

Correspondence (Stamp Cancellation)

Mr. John: asked the Minister of Posts and Telecommunications if he will give a general direction to the Post Office to institute a study of the methods used for the cancellation of letters and postcards.

Sir J. Eden: No, Sir. This is a management matter for the Post Office.

Mr. John: Does the Minister not agree that having paid for a postcard and the postage a person is justifiably annoyed when the method of cancellation adopted by the Post Office incorporates advertising material which defaces the written message on that card? Does he not consider there is a case for the Post Office and the card manufacturers reserving the top 1½ inches of a postcard so that people writing a message may keep clear of that area?

Sir J. Eden: I am sure that the Post Office will take heed of the views of the hon. Gentleman. If he has any specific point that he would like to bring directly to the attention of the Post Office perhaps he will do so.

Cable Television

Mr. Robert Cooke: asked the Minister of Posts and Telecommunications whether he has any further plans for the development of cable television; and if he will make a statement.

Sir J. Eden: I am considering the proposals, published this morning, of the Cable Television Association for the development of cable services. I shall be glad to consider comments from any organisation that wishes to offer them.

Mr. Cooke: Is my hon. Friend aware that any extension of television services resulting in a multiplicity of views and a move away from the situation whereby people have to listen to the two BBC channels and only limited competition would be welcomed by the public, and that half the complaints would disappear?

Sir J. Eden: The development of cable television, particularly at a local level, would provide for a wide range of viewing choice.

Mr. John Grant: Does not the right hon. Gentleman agree that quantity is not necessarily a substitute for quality?

Sir J. Eden: I agree that quality is entirely another matter, but I think it might be helpful to give as great a freedom of choice to the viewers as can be devised technically.

Mr. Golding: Is not the development of cable television again one of those subjects which should be considered by a committee of inquiry? It is no substitute for public discussion of the use of technical developments of this sort for the public to be told that the Minister will take their views into account in a private document.

Sir J. Eden: The Minister must very properly take into account the views of interested organisations and individuals in the development of any new means of communication, whether for entertainment or other purposes, but this, at the end of the day, depends upon decisions by the Government, and the Government will put their proposals before the House.

Colour Television (North-West)

Mr. Charles R. Morris: asked the Minister of Posts and Telecommunications whether he will now make a statement indicating when BBC television viewers in the North-West may now expect to view the BBC regional programmes transmitted from Manchester in colour.

Sir J. Eden: I have nothing to add to my reply of 8th February to the hon. Member.—[Vol. 850, c. 188.]

Mr. Morris: Has the Minister observed that over 1 million television viewers in the area of Greater Manchester, North-West Yorkshire and North Derbyshire are denied the opportunity of seeing their regional programmes in colour because of a dispute dating back to August last year, which has now developed Gilbertian proportions? Is the right hon. Gentleman aware that these programmes are filmed in colour and that at 10 minutes to 6 o'clock each evening somebody throws a switch and the viewer sees his picture in black and white? If the BBC has difficulty in persuading its staff to accept its views on this issue, will the

Minister use his power to get both sides to agree to an impartial arbitrator to make a decision?

Sir J. Eden: Naturally, I am anxious for the dispute to be resolved quickly. Discussions have been taking place, and I understand that a meeting with the Association of Broadcasting Staff is to be held this week.

Mr. Thorpe: Without in any way detracting from the view of the hon. Member for Manchester, Openshaw (Mr. Charles R. Morris), may I ask the Minister whether he will bear in mind, before settling the problem of some people who cannot see colour programmes, that in other parts of the country, particularly in my constituency, viewers would be very grateful to have programmes in black and white or in colour in a language which they understand, because at peak viewing periods all the television programmes in my constituency are in Welsh?

Sir J. Eden: The right hon. Gentleman will be aware that earlier this afternoon I published a White Paper which announced, among other things, the establishment of an independent study of coverage in rural parts of England. No doubt the study will wish to take the right hon. Gentleman's views into account.

Oral Answers to Questions — CIVIL SERVICE

Pay

Sir G. Nabarro: asked the Minister for the Civil Service what further strike action has been threatened by civil servants deprived of pay increases.

The Parliamentary Secretary to the Civil Service Department (Mr. Kenneth Baker): Members of the CPSA employed in some Departments have started selective strikes and have stepped this up today. Departments are arranging to carry on as much essential business as possible. There will inevitably be some inconvenience to the public, which the Government regret.

Sir G. Nabarro: Has my hon. Friend considered what he should do in preparation for phase 2, and how he proposes to disseminate information as to the advances in pay which will be allowable to


the Civil Service generally, because there is widespread ignorance on this topic? Does my hon. Friend recall, for example, my recent petition from the Inland Revenue in Worcestershire showing that the great majority of the civil servants employed had no knowledge of phase 2 and did not know to what they were entitled?

Mr. Baker: I am grateful to my hon. Friend for his supplementary question. We have given as much publicity as we could to the fact that as from 1st April all members of the Civil Service will be eligible for the guideline in phase 2—namely, £1 plus 4 per cent., with an upper limit of £250. For many civil servants that represents an increase of between 7 per cent. and 8 per cent.

Mr. Dalyell: What precisely are the Government telling those civil servants who say that the Government have gone back on Priestley? What is the hon. Gentleman's present attitude on Priestley?

Mr. Baker: I made it clear in Committee upstairs. On the first occasion on which we negotiated with the Civil Service unions—Easter 1971—we made it clear that we would accept Priestley but that the acceptance had to be subject to any overriding national policy, and that is what the Government have introduced.

Mr. Fell: Is my hon. Friend aware that this type of selective strike in various ports, quite often by just one person—which is what has happened, apparently in Great Yarmouth today—is not only putting out of work Customs and Excise people who are not striking but is threatening to close the whole port and put many other people out of work in an area already fairly hard hit by unemployment?

Mr. Baker: My hon. Friend is quite correct. Only a few hundred are on strike today, but they are at fairly strategic points. The Departments have a duty to try to ensure that essential tasks are carried out in these difficult circumstances.

Mr. Ewing: Several points baffle civil servants. Can the hon. Gentleman explain to them how it was that at the time of the last election the Conservative Party supported a claim by doctors for £30 a week extra, on the ground that negotiations had taken place and that the increase should be implemented, whereas

the Conservative Government are not prepared to honour the negotiating procedure and machinery to which civil servants have been tied since time immemorial? Civil servants cannot understand this difference in attitude. Can the right hon. Gentleman explain it?

Mr. Baker: It is not from time immemorial. As I have said, in our very first negotiations we made our position clear—that we would accept Priestley, but that it must be subject to any overriding national policy.

Mr. Tom King: asked the Minister for the Civil Service what percentage of civil servants is covered by incremental scales.

Mr. Kenneth Baker: Seventy-eight per cent. overall: 98 per cent. of non-industrial civil servants.

Mr. King: Does not that answer indicate that while civil servants feel that they have a grievance over the interference with their previous negotiating arrangements they also enjoy a privilege under the incremental scale which the vast bulk of industry does not enjoy? Is not this a factor which the civil servants should recognise?

Mr. Baker: It is a feature of phases 1 and 2 that increments payable to civil servants will continue to be paid. The reason for that is that increments have been part of the salary system since the middle of the last century and recognise age and experience in the post. I agree that this is not a very common practice in private industry, but a report published on Friday showed about 2 million employees in the private sector are also getting their incremental scales.

Mr. Dalyell: Was it Sir Louis Petch's idea to write that letter?

Mr. Baker: Yes.

Civil Servants (Dispute)

Mr. R. C. Mitchell: asked the Minister for the Civil Service whether he will send a communication to all civil servants countermanding Sir William Armstrong's recent letter, in view of the resentment felt by many civil servants at the implied threats contained in this letter.

Mr. Judd: asked the Minister for the Civil Service whether he will send a communication to all civil servants withdrawing the threat of possible victimisation contained in the third paragraph of Sir William Armstrong's recent message.

Mr. Kenneth Baker: No, Sir. I do not accept that the message contains or implies any threat of victimisation.

Mr. Mitchell: Is it not quite disgraceful that Sir William Armstrong, as the senior civil servant, should have got himself involved in an industrial dispute of this kind? Surely, if the Government had felt that such a letter to civil servants was necessary, it should have been signed by the Prime Minister, or at least by the hon. Gentleman?

Mr. Baker: It was Sir William's idea to send the letter and it had the full support of all the Ministers concerned with the Civil Service. I see nothing wrong, in a situation in which trade unions communicate with their members, with the Head of the Civil Service writing to all members of the staff.

Mr. Charles R. Morris: The average civil servant considers Sir William Armstrong to be the voice of the Civil Service in the Cabinet and in the Government. Will the hon. Gentleman remind Sir William that civil servants do not want to see him change his rôle and become the Government's voice in the Civil Service?

Mr. Baker: I reject that implication That was not the idea behind the letter at all. I remind the hon. Gentleman that Sir William was also writing not just to those who were on strike, or were likely to strike on 27th February, but to many hundreds of thousands of civil servants who did not strike.

Mr. Sheldon: But is the hon. Gentleman not aware that there is some conflict here between the rôle of the Head of the Civil Service doing his job in the Civil Service and his rôle as economic adviser to the Government, which he now seems to be, on matters of pay and prices? Is not the hon. Gentleman aware that it causes some resentment amongst those suffering from this multiplicity of rôles?
Will the hon. Gentleman comment on the report that the Chairman of the

Board of Customs and Excise has stated that there is to be disciplinary action and suspension without pay for certain of those concerned in industrial action? Are we not now facing a new and even more serious situation? We would like to hear the hon. Gentleman's reply on this issue.

Mr. Baker: The hon. Gentleman is referring to a letter from Sir Louis Petch, which was sent to the staff of Customs and Excise on Friday. There have been discussions today. Sir Louis reminded the staff that they have to discharge certain duties laid upon them by the House of Commons and that it is his responsibility to ensure that those statutory obligations are carried out.

Mr. Dalyell: On a point of order, Mr. Speaker. In view of the unsatisfactory nature of the reply, I beg to give notice that I shall seek to raise the matter on the Adjournment at the earliest opportunity.

Mrs. Renée Short: asked the Minister for the Civil Service why staff who were absent on Tuesday 27th February were asked to give the precise reasons for their absence on a form which is to be attached to their personal files.

Mr. Kenneth Baker: When staff are away, Departments need to know the reason, particularly for purposes of pay. Absence on uncertificated sick leave, for instance, might be expected to involve filling in a form. This is a matter for Departments but most of them have not asked those known to be on strike to complete a form.

Mrs. Short: Is the hon. Gentleman aware that there is evidence that members of the Civil Service who were out on strike on 27th February have been asked to give reasons and to provide the information on a form which has a certain code on it, and that the code implies that the information will be transferred to their personal files?

Sir G. Nabarro: A very good thing.

Mrs. Short: Will the hon. Gentleman give an undertaking that this will not be done, since it would amount to discrimination and victimisation?

Mr. Baker: Members of the Civil Service on strike on 27th February, or


thought to be on strike by their Departments, have been asked for the information because their pay had to be stopped for that day. The record is being kept on their pay records and pay files. In nearly all cases in the Civil Service, this is not the same as the personal records file.

Mr. Sheldon: Will the hon. Gentleman give an assurance that there will be no victimisation?

Mr. Baker: There will be no victim—may I say this? [HON. MEMBERS: "Oh."] The House will appreciate that if action has taken place of intimidation and that sort of thing—of which I am glad to say I have had no reports at all—I can assure the House that the civil servants who went on strike today or on 27th February will lose one day's pay or pay for as many days as they are out on strike, and that also means that they will lose the pension entitlement that that day or days would have earned.

Oral Answers to Questions — HOUSE OF COMMONS

Members' Interests

Mr. William Hamilton: asked the Lord President of the Council if he will now take steps to implement the recommendations of the Select Committee on Members' Interests (Declaration) of 4th December 1969; and what discussions he is having to ascertain the feasibility of establishing a compulsory public register of Members' outside financial interests.

The Lord President of the Council and Leader of the House of Commons (Mr. James Prior): I have nothing further to add at this stage to the Written Answer which I gave to my right hon. and learned Friend the Member for Hertfordshire, East (Sir D. Walker-Smith) on 19th February. Discussions on this matter are continuing. [Vol. 851, c. 14.]

Mr. Hamilton: Will the right hon. Gentleman indicate when these discussions will be concluded? Will he, in the course of the discussions, direct his attention to the recent proposals put to the West German Parliament about a code of conduct for its members? Will he provide time for a debate on the report, which has now been before the House for nearly two-and-a-half years? The situation is extremely unsatisfactory. Hon.

Members who have nothing to hide will not take objection to the compulsory public register for which I am asking.

Mr. Prior: I do not feel that the British Parliament will necessarily want to be guided by what other Parliaments are doing in making up its own mind on the issue, but of course I will consider what the German Parliament is doing. I think that it would be sensible now to proceed with the discussions that have been going on in both the Conservative and the Labour Parties and, I think, in the Liberal Party, and that they should be brought to a conclusion before much longer. I recognise that the hon. Gentleman is keen that the vast majority of hon. Members should be protected in the way he thinks necessary, and I am certain that a good many others share his concern. It would be for the convenience of the House if we could come to a decision on all this before very much longer.

Mr. William Clark: Does not my right hon. Friend agree that if this public register is introduced it should cover not only Members of Parliament but local councillors throughout the country?

Mr. Prior: That is a rather wider question, for which I am not certain I have responsibility. Certainly, I believe that the reputation of Parliament in this respect is extremely high and that the main purpose of any register would be to see that hon. Members were given proper protection against some of the imputations made against them.

Mr. Edelman: Will the right hon. Gentleman consider adding to this potential public register all those other lobbyists operating within the precincts of Parliament, including journalists?

Mr. Prior: That is a much wider question, and one which requires a good deal of consideration. Members of the Parliamentary Lobby have told me that they believe that they should be included in some such register. I think that we had better see how the consultations between Members of Parliament go before we proceed further on that course.

Sir G. Nabarro: Will my right hon. Friend also bear in mind that a wide variety of business and professional men in the House earn their living outside the House by a variety of professional means, and that they include notably, authors?

Mr. Prior: Yes. What is more, I think that the House would be very much the poorer place if they were not here.

Mr. Atkinson: During the consultations which the right hon. Gentleman has mentioned, will he seek to establish the principle that it is wrong for the Government to be able to practise their patronage by giving thousands of pounds to back benchers on both sides of the House and to use their influence in the appointment to Government-sponsored jobs, whereby many back benchers hold appointments and receive large amounts of money handed out by the Government? Will the right hon. Gentleman seek an opportunity to stop this practice?

Mr. Prior: The answer to that is a firm, "No". I also strongly reject the imputations in what the hon. Gentleman said.

Oral Answers to Questions — POPULATION PANEL (REPORTS)

Sir Gilbert Longden: asked the Lord President of the Council when he will be ready to make a statement on the report from the Population Panel.

Mr. Prior: I shall endeavour to publish the Population Panel's report before the Second Reading of the National Health Service Reorganisation Bill. I shall make the Government's attitude to the report known to Parliament when it is published.

Sir G. Longden: I thank my right hon. Friend for that reply. May I ask him to ensure that the Government's population policy is published before the United Nations Population Year?

Mr. Prior: I hope that we shall take the Second Reading of the National Health Service Reorganisation Bill within the next 14 days. I think that my hon. Friend can be satisfied, therefore, that the report of the Population Panel will be published in good time. I hope that then the House and the country will have opportunities to discuss the report, and the Government will make up their mind later, about what should be done.

Oral Answers to Questions — WALES

Toxic Chemicals (Disposal)

Mr. John: asked the Secretary of State for Wales on how many sites in

Wales toxic chemicals have been deposited by firms contracting to dispose of them.

The Minister of State, Welsh Office (Mr. David Gibson-Watt): This information is not at present available but the Welsh Office, in co-operation with local authorities, is making a full survey of all waste disposal sites, including those where toxic chemicals may have been deposited. I hope the results of this survey will be available later this year.

Mr. John: May I express the hope that a code of practice for the clumping of chemicals will be drawn up to avoid environmental damage such as that caused by the careless dumping of such chemicals in the past?

Mr. Gibson-Watt: I am well aware of the hon. Gentleman's concern. I can assure him that my right hon. Friend and I are equally concerned about the case he has raised and the matter in general.

Oral Answers to Questions — TRADE AND INDUSTRY

Licensed Trade (Tied Houses)

Mr. Lipton: asked the Secretary of State for Trade and Industry whether, in view of the recommendation of the Monopolies Commission in 1969 and British membership of the EEC, he will now seek to end or modify the tied house system.

The Under-Secretary of State for Trade and Industry (Mr. Anthony Grant): I would ask the hon. Member to await the outcome of the consideration by my right hon. Friend the Home Secretary of the Report of the Erroll Committee.

Mr. Lipton: We have been waiting for that for a long time. Is the hon. Gentleman aware that the number of free houses is getting less, the number of tied houses is getting more, and the number of licensees being replaced by managers is increasing? The Government are giving the impression that they want to murder the traditional English pub.

Mr. Grant: All these matters will be taken into consideration by my right hon. Friend. However, as the Erroll Committee reported only in December and covered a very wide range of matters, I do not think that the delay has been unreasonable.

BOMB INCIDENTS (LONDON)

Mrs. Shirley Williams: (by Private Notice) asked the Secretary of State for the Home Department if he is satisfied with the co-ordination between the City Police and the Metropolitan Police in respect of the recent bomb emergency, and if he will make a statement about his recent talks with both forces.

The Secretary of State for the Home Department (Mr. Robert Carr): Yes, Sir. The two forces co-operated effectively in taking the additional precautions which were put in hand in central London on 8th March from the early morning onwards. They are also co-operating closely and effectively in the follow up of last Thursday's events. In particular, they are working together in the criminal investigations arising from the explosion which took place outside the Old Bailey.
When I made inquiries on the evening of 8th March, I found that the two Commissioners of Police were already sifting the lessons to be learned from the day's events and, in particular, were together examining how time had been lost in identifying the exact location of the Old Bailey bomb. The City Commissioner has made a public statement explaining how this occurred, but, apart from this unfortunate but isolated human error, the procedures followed and the action taken by the two forces in dealing promptly with a most difficult and dangerous situation reflect, I believe, a high level of co-operation and efficiency.

Mrs. Williams: We on this side of the House echo the praise which the Home Secretary has offered to the Metropolitan Police and have put down a motion to that effect. It is not my purpose to point to a particular human error, but I should like to ask the right hon. Gentleman, first, whether in view of the emergencies which have only recently arisen, it is wise to have a separate city force within London? Secondly, on a more immediate matter, may I ask whether the statement made by the head of the City of London CID to the effect that no special patrols were in operation within the City of London is a situation which can possibly be allowed to continue in view of the danger to the City as well as to the Metropolitan district?

Mr. Carr: If we were starting again to create a police force, we might have a single police force for the whole of the London area. But that is not the situation. I believe that traditions and practices in these matters are important. and as long as I am satisfied, as I am, that the two forces are now co-operating closely together, I believe that that is what will lead to greater security for the people of London than would be afforded by the enormous upheaval, argument and controversy which would be caused by any radical change. I am satisfied that the co-operation is effective. I believe that it was effective before last Thursday. The one human error was very unfortunate, but I think that is what it was
I am satisfied that, starting from the top, the two forces are working closely together. We can learn from what happened last Thursday. For example, in the next few weeks we can see the two forces beginning to exchange people, working in each other's control rooms so that they are sure of each other's procedures. It is possible that we shall hear talk about the formation of a joint mobile unit to cover the City and the rest of central London, which is the point principally covered, I think, by the police officer to whom the hon. Lady referred.

Mr. Tugendhat: The hon. Lady the Member for Hitchin (Mrs. Shirley Williams) referred to the unexpected emergencies which have arisen in recent clays. Is my right hon. Friend able to answer two questions? First, is he aware that everybody in London, including Westminster, was filled with admiration for the striking hospital workers who went back to work to meet the emergency? Secondly, has he been able to have any discussions with the police and with ASLEF concerning the effects which the train drivers' strike has on traffic coming into London and on the difficulties which the police may have in maintaining the surveillance necessary at this unfortunate time?

Mr. Can: I am sure that the whole House agrees with my hon. Friend's expression of admiration for the promptness with which the hospital workers returned to their jobs and the way in which St. Bartholomew's, St. Thomas's and the other hospitals involved dealt, with great


effectiveness and speed, with a very large number of casualties. The fact that most of the casualties, thank goodness, turned out to be not serious in a fundamental way did not lessen the enormous task of those hospitals in coping with so many people in such a short time.
On the second point, it cannot be denied that the train drivers' strike last Thursday made the job of the terrorists much easier and the job of the police much more difficult.

Mr. Roy Jenkins: Without wishing to make too much of a particular incident, may I ask the right hon. Gentleman whether he can put forward any argument, other than that of tradition, to show why the City force should remain independent and, if he is planning for the future, why it should be treated differently, except for the legislative position, from that of many great cites with populations of up to 300,000 or 400,000 which have lost their independent forces?

Mr. Carr: It is perhaps natural for me and for my right hon. and hon. Friends to pay a little more attention to the importance of tradition than do hon. Members opposite. This is very largely a matter of tradition. As I said openly in response to the question of the hon. Lady the Member for Hitchin (Mrs. Shirley Williams), if we were starting again from scratch we would not have two forces. What I want the House to think about is this: will London be better policed over these critical months and in the year or two ahead if we continue with close co-operation between the existing two forces or if we go in for all the controversy and upset which, at this juncture, would no doubt be caused by creating a single force?

Mr. Fowler: Does my right hon. Friend agree that it has never been proved that bigger police forces mean better police forces and that the mistake which was made could have been made by a police force of any size? Is it not absurd to base a proposal for amalgamation—which, incidentally, was rejected by the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins)—on one incident alone?

Mr. Carr: I am sure that what happened on Thursday is no case for amalgamating the two. When the right

hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) carried out the original amalgamation of police forces a few years ago, presumably he must have considered this suggestion, as I did and as my right hon. Friend the Member for Barnet (Mr. Maudling) did, and must have decided against it.

Mr. David Steel: Is it the case that the work of the highly effective mobile unit is confined to the area of the Metroplitan Police?

Mr. Carr: Yes, and that is why I mentioned that perhaps one of the lessons to be learned from what happened last Thursday is that there could and should be a joint mobile unit to cover the whole area.

Mr. George Cunningham: Will the right hon. Gentleman assist the House by confirming or denying that if the Metropolitan Police last week had covered the whole of London, including the City, there would have been no need for the message which was messed up and that the police would have been dispatched straight to the Old Bailey?

Mr. Carr: I do not think that that follows, because the misinterpretation of the message could have occurred within one force as much as between two forces. I was at particular pains to be assured about that. It was not a breakdown in procedure or a lack of procedure. It was a human error in interpreting a message which was received. I do not complain about this, because we all act impulsively and quickly in these matters, but a message would have had to be transmitted because The Times, instead of dialling 999, got on to the Press bureau of Scotland land Yard, which inevitably caused a transmission of messages rather than straight-through communication.

Sir Gilbert Longden: Does my right hon. Friend accept that in these and similar cases it helps no one except the criminal for every cautionary plan taken by the police and every plan they may have in future to be mooted abroad twice a day by the mass media?

Mr. Carr: There is bound to be public concern about these matters. To that extent they are bound to be mooted abroad, and I do not complain about that. I appreciate the attitude shown by


the whole House to this matter. There is a wide appreciation in this House and outside that of all that was done on Thursday, the great bulk of it was very well done and the safety of London has gained a lot by it. There was this one error. I hope that the City Police in particular will gain some credit for not covering it up but openly and quickly coming forward and saying that there was an error.

Mrs. Shirley Williams: Yes, indeed. But may I point out that it was the head of the City CID who told the newspapers that there were no mobile patrols in the City of London? We would not have raised that matter had it not been made public. Therefore, it is a matter of the greatest urgency that mobile patrols should be established as quickly as possible, because every terrorist in the world now knows that the City of London does not have the same protection as the metropolitan area.

Mr. Carr: I agree that this is a matter of urgency. I am treating it as such, and I assure the House that the two Commissioners of Police are treating it as such.

BERMUDA (MURDER OF GOVERNOR)

3.42 p.m.

The Secretary of State for Foreign and Commonwealth Affairs (Sir Alec Douglas-Home): With your permission, Mr. Speaker, and that of the House, I wish to make a statement.
The House will have learnt with the deepest regret of the murder in Bermuda late on Saturday night of the Governor, Sir Richard Sharpies, and his aide-de-camp, Captain Sayers. Both men were shot while walking in the grounds of Government House. The culprit or culprits have not yet been discovered. A team of New Scotland Yard officers are now assisting the Bermuda police in their investigations and every possible effort will be made to bring the assassins to justice. A state of emergency has been proclaimed by the acting Governor to provide the police with special wider powers. There is no sign whatever of any general unrest in the island.
Sir Richard Sharpies had a long, gallant and most distinguished career of public service, in recent years as our colleague in this House and as a Minister of the Crown. The knowledge of our respect for him and of our deep regret will, I hope, be of some comfort to Lady Sharples and the other members of his family at this time. I also extend the sincere sympathy of the House to the family of Captain Sayers, whose promising military career has been so cruelly cut short.

Mr. Callaghan: The Opposition fully and completely associate themselves with what has been said by the Foreign and Commonwealth Secretary in expressing our great regret at the death of both Richard Sharpies and Captain Sayers and the hope that their families will derive some consolation from that knowledge.
Most of our recent contact with Richard Sharpies was on the marathon Immigration Bill of last year. Whatever we thought about that legislation, I think all who served on that Committee were left with an abiding impression of his unfailing courtesy, patience and consideration during those long sittings.
We can only express the hope that those responsible will be brought to justice as soon as possible.
Perhaps it might be fitting if the House were to say something to the people of Bermuda. This House has many associations with Bermuda and it is right that we should recognise that in this small island community this outrage will have cast a shadow over all races and all colours. We can only hope that that shadow will be lifted from them as quickly as possible.

Mr. Thorpe: The Foreign and Commonwealth Secretary will be aware that the whole House shares the sense of horror and shock that he has expressed. There is the added poignancy that, as he and the right hon. Member for Cardiff, South-East (Mr. Callaghan) said, Richard Sharpies, who was recently our colleague, was well respected and much liked in ail parts of the House. We wish to be associated with the messages of sympathy to Lady Sharpies and the family of Captain Sayers.
The right hon. Gentleman will be aware that, unhappily, this is not the first


time that murder has been committed against a public servant in Bermuda. The murders may or may not be linked. Will he tell us whether the investigations are under the control of Scotland Yard or are being carried out by Scotland Yard under the direction of the Bermuda police? Will he assure the House that every possible assistance will be given and that if it is necessary to send out further personnel from this country we shall not hesistate to do so?

Sir Alec Douglas-Home: Yes, Sir, we would certainly do that. The matter is under the direction of the Bermuda police, but they asked for the assistance of Scotland Yard officers, so there will be the most complete co-operation and co-ordination.

Miss Quennell: Is my right hon. Friend aware that people in East Hampshire are deeply angry and hurt at this despicable cowardice which has so cruelly removed one of our number in this foul murder recently? Is he able to give the House some reassurance about the security and protection that is being afforded to the late Sir Richard's wife and family who remain on the island until their return?

Sir Alec Douglas-Home: I have asked for a complete report on this matter. I have no doubt that the authorities on the island are on the alert. I cannot tell my hon. Friend exactly what the security arrangements were at the time of the assassination, but I will make certain that this matter is gone into.

Rear-Admiral Morgan-Giles: Would not the best tribute that we could pay to our late colleague the Governor of Bermuda and his ADC who died with him be to institute in Bermuda a really tough régime from the security point of view? Would it not also be in the interests of the people of Bermuda as a whole that this should be imposed and maintained so that the tourist traffic, on which they depend so much, should not be scared away?

Sir Alec Douglas-Home: I have no doubt that the authorities on the island are fully aware of the need for a police force which can keep security for ordinary citizens throughout the island.

As has been said, this island has been famous for the tolerance inside it. Nevertheless, security must be kept.

SOUTH AFRICA (EMPLOYEES OF BRITISH COMPANIES)

Mr. Alexander W. Lyon: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration: namely,
the report in the Guardian this morning of the conditions and rates of pay of employees of British companies in South Africa.
The matter is certainly specific. It alleges against about a dozen British companies that the rates of pay that they are paying to their employees are less than those required to maintain the essential elements of life as recorded by what is known as the poverty datum line. The poverty datum line is no more than that which is required to maintain people against starvation. Surely it is right that this House, which in the past has had a notable record of concern for people living in régimes where we have some direct responsibility, should take into consideration the conditions of people living in South Africa at this level for whom we may have some responsibility.
It is important precisely because human life and the misery of conditions in South Africa are of the utmost importance in determining the future conduct of blacks in the Southern African situation. We have seen only too recently the tragic consequences of communal strife in our own country. In the statement made a few moments ago we heard of what might possibly be the effects of communal strife elsewhere. If this were to break out in the Southern African situation the consequences would be terrible, and it is right that we should take any steps that we can in order to safeguard that area of the world against those consequences.
The really difficult part of my task is to persuade the House that this needs urgent consideration, as distinct from merely putting down a Question at some suitable date for the Foreign Secretary to answer. It requires urgent consideration because of the contents of the report,


which I advise hon. Members to read if they have not already done so. It refers to people complaining that their children are suffering from kwashiokor because of the conditions in which they are made to work, and also that because of the rates of pay they cannot afford sufficient milk, for instance, to feed their children.
The response of the manager of a British-owned firm to that complaint was that the milk was fed first to the cattle and only afterwards, if there was anything to spare, to the Bantus. I suggest that in consequence of that kind of attitude it is of the utmost importance that this report is debated in the House in order that urgent steps are taken to remove the threat to life and to the health of African employees of British companies because of their present conditions and rates of pay.
It may be that in this case it would be easy for the Secretary of State—

Mr. Speaker: Order. The hon. Member is going over the line. He is not allowed to make now the sort of speech that he would make if his application were allowed. The hon. Member must confine himself to why I should give the matter precedence over other business of the House.

Mr. Lyon: I was seeking to apply my mind precisely to that point, because the answer which I suspect may be arising in your mind, Mr. Speaker, is that this argument could be met by some executive act on the part of some members of Her Majesty's Government. What I was seeking to suggest to the House was that although it would be possible for some Ministers to act in that way, there is no sign that they are responding in such a way to this kind of report. It is therefore important that the House should express its mind urgently upon this matter.
The House has not discussed this issue in all the years—

Mr. Speaker: Order. The hon. Member is going too far. He is making his speech on the merits of the case, which he is not allowed to do.

Mr. Lyon: I shall hasten not to do that, Mr. Speaker. All I am asking is that the matter should be considered

fairly upon its merits as a matter of the utmost urgently, and I hope that having considered the arguments which I have deployed you will think it right to rule that there is here a prima facie case for consideration.

Mr. Speaker: I am not sure that that is what I have to do under the Standing Order. The hon. Member was courteous enough to say that he would raise this matter, and, even though in my view he has gone over the line, that has not prejudiced me against his application.
I have to consider this matter very carefully. Without doubt these allegations are important, and at some stage they should be investigated. My decision is simply whether they should be investidated in this House today or tomorrow to the prejudice of other business of the House. I am afraid that I cannot grant the application.

QUESTIONS TO MINISTERS

Mr. Jeffrey Archer: On a point of Order, Mr. Speaker. I wish to raise a matter on Question No. 18 in the name of my hon. Friend the Member for Haltemprice (Mr. Wall).

Mr. Speaker: I should very much prefer points of order on Questions to be raised immediately at the end of Question time. However, I call the hon. Member to raise his point of order.

Mr. Archer: I apologise for that, Mr. Speaker, but as the statement was so important I thought that it would be wise to wait.
I asked my right hon. Friend the Minister for Posts and Telecommunications whether he was allowed to see the IBA film which had been confiscated from Anglia Television. It is well known that 57 members of the House have applied to see the film, and we have not raised as a point of order the fact that we have not been allowed to see it. In his reply the Minister said that it was up to the IBA to decide whether he should see the film, and the point of order for you, Mr. Speaker—

Mr. Speaker: Order. I think that I can help the hon. Member straight away. This is nothing to do with the Standing Orders of the House.

Mr. James Johnson: Further to that point of order, Mr. Speaker. As it is—

Mr. Speaker: Order. With respect to the hon. Member, I have ruled that this is not a matter of order. There is nothing in the Standing Order to deal with a situation of this sort.

Orders of the Day — WAYS AND MEANS

Order read for resuming adjourned debate on Question [6th March],

AMENDMENT OF THE LAW

That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance; but this Resolution does not extend to the making of amendments with respect to value added tax so as to provide—

(a) for zero-rating or exempting any supply;
(b) for refunding any amount of tax;
(c) for varying the rate of that tax otherwise than in relation to all supplies and importations; or
(d) for any relief other than relief applicable to goods of whatever description or services of whatever description.

Question again proposed.

BUDGET RESOLUTIONS AND ECONOMIC SITUATION

3.56 p.m.

The Chief Secretary to the Treasury (Mr. Patrick Jenkin): I am anxious, in opening the debate this afternoon, to be reasonably brief as I know that a large number of right hon. and hon. Members are anxious to catch your eye, Mr. Speaker. I intend, therefore, to confine my remarks to those parts of the Budget judgment which are my concern at the Treasury. I shall touch on corporation tax, I shall try to answer various points raised in last week's debates, and I want to reply to the attack of the right hon. Member for Leeds, East (Mr. Healey), on unification; but the main part of my speech will be devoted to answering the charges levelled at our public spending plans, particularly the criticisms voiced in the recent Report of the Select Committee on Expenditure.
In his Budget statement the Chancellor touched very briefly on our proposals under the new corporation tax for dealing with groups of companies. This is not a subject with much political sex appeal, but I hope the House will bear with me for just a moment or two while I explain what we intend to do and why. I need not go into great detail because the Inland Revenue published a full statement on Budget day.
Those who took part in our debates last year will remember that one of the amendments moved in Committee was to allow more flexible arrangements for the surrender of advance corporation tax between members of a group of companies. As the law stands at present, a company may surrender only its surplus advance corporation tax, that is to say, ACT surplus to the amount that can be set against corporation tax on the income of the particular year. What we now propose is that the parent company should be able to surrender to its subsidiaries any amount of advance corporation tax in respect of dividends regardless of whether or not it is surplus.
As a corollary, we shall need some restriction on the use of the surrendered ACT. We intend to allow it to be set against the current tax of the company to which it is surrendered or carried forward, and the facility contained in last year's Finance Act for it to be carried back against the tax due for earlier years will be withdrawn. We believe that this measure will be of help to certain groups of companies for which the existing rules are needlessly restrictive.
At the same time, and perhaps of more importance to the House, we are acting to check the growing abuse of group relief provisions as they relate to losses and capital allowances. The House will remember that my right hon. Friend indicated that perhaps up to £100 million might be lost in the coming year if we did not act. It has become apparent that the rules as they now stand are open to serious abuse and must be changed. We have discussed the various possibilities with representatives of industry and the professions and we believe that the solution we propose, while dealing effectively with the main areas of abuse, will not impose penalties in genuine cases.
Hitherto, the group relationship under the Taxes Act is defined in terms of ordinary share capital. A company and a subsidiary in which it holds at least 75 per cent. of the ordinary share capital may be treated as a group. What is now happening is that a company which is a full member of a genuine trading group can at the same time, by manipulation of its share capital, become for tax purposes the subsidiary of a totally unconnected company. And it can thus, for tax

purposes, effectively sell any unused capital allowances or losses to that other company at a discount. This is clearly wrong; and what we propose is a more realistic test of group relationship.
In future the parent company will need to hold not only 75 per cent. of the ordinary share capital but also be entitled to 75 per cent. of its profits and 75 per cent. of its assets. This will prevent, for instance, special classes of shares being created which entitle one parent to the profits and assets while another parent can be treated as grouped with the company. We also propose to introduce measures to counter arrangements which, from the outset, envisage the subsidiary company passing under the control of another company at the moment when its losses have been sucked dry. There will be similar provisions for consortia and partnerships of companies, and also for the conditions covering surrender of ACT within groups, the latter based, of course, on a 51 per cent., and not on a 75 per cent., test.
These arrangements will take effect from Budget day. However, we recognise that groups which do not qualify under the new tests might be in serious difficulties because it would take time for them to reorganise so as to qualify under the new more stringent rules. We propose therefore that there will be a period of grace for groups and consortia already in existence. Provided that they satisfy the new tests by April next year, they can continue to qualify for group relief during the coming financial year. We are also taking steps to ensure that there is no retrospection. There will be special arrangements for first-year allowances in respect of contracts entered into before Budget day.
Another matter left over from last year related to some anti-avoidance legislation consequential upon the change to the imputation system. With one exception the amendments which we propose will simply adapt the way the existing provisions apply to the new imputation system. The one exception relates to our old friend, the dividend stripper, where tighter provisions are required.
Like other hon. Members, I have from time to time voiced criticisms about much of our anti-avoidance legislation, and I know that certain aspects of it, notably what is now Section 460 of the Taxes Act,


have been subjected to some criticism in the courts. While it is necessary this year to legislate in the way I have indicated, I must tell the House that we are having a radical look at the whole field of anti-avoidance legislation to see whether some new approach is possible which may perhaps avoid the complications and uncertainties of the present legislation. It is not an easy field and I certainly cannot guarantee that we shall succeed. It will certainly take time. But for my part I would hope that we might be able to finish this review in time for any consequential legislation to be brought forward next year.
I should now like to take up a few points raised in the debates last week. The hon. Member for West Lothian (Mr. Dalyell) asked about our new share savings scheme proposals, the right hon. Member for Birkenhead (Mr. Dell) raised a number of points about the taxation of North Sea oil; and my hon. Friend the Member for Horsham (Mr. Hordern) raised an important point about profit margin control.
The hon. Member for West Lothian expressed some reservations about the new share savings scheme proposals—in distinction to the warm welcome which those proposals received both in the Press and outside the House. He pointed out that although a participant will be protected against a fall in the value of shares during the savings period, he has no protection once he has become the full owner of his shares. This is of course quite right and proper. It would be very difficult in these circumstances to justify giving him any special protection from the normal risks attaching to share ownership.
Secondly, the hon. Member suggested that the scheme would be a drag on mobility and that provision should be made for transfer rights. I agree that we should aim to avoid any drag, and we have various means in mind to achieve this.
Thirdly, the hon. Member complained that there would be no dividends or voting rights during the savings period. This is surely right, for it is only by such restrictions that one can justify making shares available at up to a 30 per cent. discount. Finally he said that no provision was made for public sector employees. That is of course true—but

then we on this side of the House have never taken the view that because a benefit cannot be open to all, it must not be open to any. These proposals have been widely welcomed, and I hope that a large number of firms will consider introducing share savings schemes for their employees at the earliest possible moment.

Mr. Tam Dalyell: Is there any apparent reason why there should not be voting rights?

Mr. Jenkin: Then one would have to find some other way of justifying the issue of shares at a discount. It is a matter of valuation. If the rights from the moment shares are issued are identical to those of the ordinary shareholder, they could only be issued at the price at which the ordinary shareholder would have shares issued to him. If we are to give the advantage of the power to issue them at discount, there must be restrictions to justify such a discount. It is exactly the same principle as in the share incentive scheme contained in the legislation which went through the House last year.
The right hon. Member for Birkenhead raised a number of points about North Sea oil. He has apologised to me that he cannot be here this afternoon. Since he raised points of such importance, I felt that it was right they should receive a prompt answer.
The right hon. Gentleman welcomed my right hon. Friend's swift response to the Public Accounts Committee's Report, and his main anxiety was whether the Chancellor had gone far enough in his proposals. I must make it clear, as did my right hon. Friend last Tuesday, that he was not purporting to give the Government's full reply to the Public Accounts Committee's Report. His present proposals are confined only to the question of dealing with the artificial losses—very necessary if the revenue yield from the North Sea is not to be seriously impaired.
But the proposals regarding the losses are not—nor were they presented as being—the complete answer to the question of ensuring an adequate share for the Exchequer in North Sea profits. The Government already had under consideration before the PAC reported the licensing terms for North Sea operators and the


general question of the "take" from operations on the Continental Shelf. These are matters with which my right hon. Friend the Secretary of State for Trade and Industry is closely concerned. The right hon. Gentleman and the House may take it that there will be a further statement in due course.
The right hon. Member for Birkenhead also raised another important point, and it is important that the answer should be on the record. He asked about the advice alleged to have been given by the Inland Revenue in 1964; also the Press has pursued this same point. I think that there has been some misunderstanding about this, and I should like to get the story straight. The Inland Revenue did not recommend one method rather than another of taxing the yield from the North Sea. What the Inland Revenue did was to point out that oil companies would be liable to company tax on their North Sea profits—since at that time there were little or no artificial losses to set against them—but that a royalty would produce a more immediate yield because of the effect of capital allowances. It is right that this point should be made clear.
My hon. Friend the Member for Horsham spoke on Thursday night about profits margin control, and he referred to the proposal in the Green Paper that price reductions should be made when unit costs fall. He said that this was quite inconsistent with the objective of safeguarding investment. This simply is not so. I realise that there have been wide misconceptions about this part of the Green Paper and I welcome the chance to clarify what is meant by it. Despite what some hon. Members have said, it does not mean that increases in sales must automatically lead to price reductions. The profit margin control will not apply to net profits as such but to net profits as a percentage of turnover, so that as sales rise profits normally will be able to rise, too.
The provision in the Green Paper about falls in unit costs is not intended, as it now stands, to refer to all costs but only to allowable costs such as labour, raw materials, rent and interest rates. Therefore, if the code went through in this form no price reductions would be required to the extent that rising sales lead

to reductions in unit costs on non-allowable items, such as depreciation, overheads, marketing, transport and so on. Moreover, the Green Paper refers only to "significant" falls, and we do not envisage insisting on price reductions on account of every minor fluctuation. All this is subject to the Price Commission's discretion not to insist on price reductions if to do so would seriously impede investment. I also emphasise that the Green Paper is a consultative document and as such is not necessarily the Government's final word.
My hon. Friend also said in another part of his speech:
…what an incomes policy can do is to lower inflationary expectations."—[OFFICIAL REPORT, 8th March, 1973; Vol. 852, c. 840.]
My hon. Friend is absolutely right and I believe that our counter-inflation policy is doing just that. But it means not merely holding prices steady or even limiting the scope for raising prices. It must also mean taking every opportunity to bring prices down, and I do not believe that we are asking too much of industry in this regard.

Mr. Alex Eadie: The Chief Secretary to the Treasury said that the Green Paper was a consultative document, and therefore cannot be taken as Government policy. If that is so, can he explain why, when miners are provoked to take industrial action, the Coal Board, on the question of fringe benefits and an extra week's holiday, replies, "But we cannot give it to you because it is not in the Green Paper, which sets out Government policy. It would mean transgressing Government policy if we were to grant such a provision." How can it be a consultative document when leaders of nationalised industries have been told that this is the gospel of this administration?

Mr. Jenkin: I hope that the hon. Gentleman will use his considerable influence in the mining industry to persuade that trade union at any rate to talk to the Government about the consultative document. Perhaps if his union does so, the other unions might follow and we shall be able to have some meaningful consultation.

Mr. Nicholas Ridley: Can my hon. Friend say whether "remuneration" in the Green


Paper includes the increase in the contribution which the employer might make to the pension scheme? It is thought in the gas industry that the unions are being bought off by an increase in the Gas Corporation's contribution towards pensions. Is that within the terms of the Government's incomes policy? If so, surely every other trade and profession in industry can do the same?

Mr. Jenkin: It has been made clear that improvements in fringe benefits such as pension schemes can be awarded outside the pay limits. I would rather not comment on the proposals which at present are under consideration in the gas industry.
I now turn to the core of my speech—namely, public expenditure.

Mr. Dalyell: Mr. Dalyellrose—

Mr. Jenkin: There has been a great deal of criticism of our spending plans, including some wild and wholly inaccurate accusations, from unlikely sources. For instance, on the day before the Budget, The Times, in its leader said,
…the Government is now committed to a faster rate of growth of public expenditure spending over the next five years than any Government for over a decade.
Not to be outdone by his old friend the editor of The Times, the right hon. Gentleman the Leader of the Opposition said,
Under this Government expenditure has risen more rapidly than at any time in our history."—[OFFICIAL REPORT, 6th March, 1973; Vol. 852, c. 284.]
I can tell the House that both those statements are palpable nonsense. Our five-year plans published last December provided for an average annual rate of growth between 1972–73 and 1976–77 in cost terms at constant prices of 2·5 per cent. I know that the National Plan, of blessed memory, was short lived, but I am a little surprised that the right hon. Gentleman should have wholly expunged it from his memory. It represented the then Government's public spending commitment not to 2·5 per cent., not even to 3·5 per cent. but to nearly 4·5 per cent. average actual growth between 1964–65 and 1969–70. I am glad to have the assent of the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins).

Mr. Roy Jenkins: indicated dissent.

Mr. Jenkin: Perhaps I should make a good auctioneer. Although the National Plan was thrown out of the window, the public spending plans of the previous Government were not. I take the figures from the Labour Government's last public expenditure White Paper of December 1969. They knocked up annual increases of 6·7 per cent., 6·6 per cent. and 9 per cent. in three successive years between 1965 and 1968. That, as the House will appreciate, was considerably higher than even the two years, 1973–74 and 1974–75, which represent the hump in our five-year programme.
I shall go further. If the National Plan projection had been on the same basis as our 2½ per cent., the figure would have been no less than 5 per cent. per annum—that is twice the rate which we are now planning. Perhaps I can leave the right hon. Gentleman and the editor of The Times to pursue their researches together in unaccustomed harmony. I only hope that next time they manage to agree—and it does not happen very often—they will do so with greater regard for historical accuracy.
I now turn to the recent report of the Select Committee on Expenditure. The report, published last month, contained much more specific criticisms related to the two years 1973–74 and 1974–75. These criticisms can be briefly but I hope accurately summarised as follows.
First, since last year's White Paper there have been large additions to planned expenditure not only for 1972–73 and 1973–74 but for later years as well. The committee said that that was not what it had been led to expect last year. It is right to point out that it is referring not to evidence which it was given but to a statement in one of its previous reports.
Second, although evidence by Treasury officials suggested that the additional programmes were justified on the grounds that there was room for them in the first year of the period 1972–73 and again in the last two years 1976–77, the committee said that
By implication at least the Government ignored their likely impact on the crucial intervening years 1973–74 and 1974–75.
That, the committee said, was contrary to the principles of orderly planning.
Thirdly, as a consequence of this, the committee said that the Government will have to restrict the growth of personal


disposal incomes and consumption to a rate of 2½ per cent. between now and 1974, which is significantly below the rate of growth of total output.
The House will recognise that these are serious criticisms. If they were true they would lay the Government in general, and the Treasury in particular, open to censure. However, I must tell the House that in my view, and that of the Government, the committee has been less than fair either to itself, to its witnesses or to the Government.
I hope that the House will bear with me for a few moments while I seek to justify that view. I start with what I hope will be common ground. There has been no serious doubt cast—and certainly none cast by the Select Committee—on the acceptability of the Government's spending programmes in the medium term. Table 1.2 of last December's White Paper, which I explained at some length in the debate on the White Paper of 7th February, demonstrates in particular that on any reasonable assumptions about the growth of GDP our public expenditure programmes over the whole five-year period are consistent with an acceptable rate of growth of personal consumption after the requirements of private investment and the balance of payments have been met.

Mr. J. Bruce-Gardyne: Mr. J. Bruce-Gardyne (South Angus) rose—

Mr. Jenkin: I want to develop the argument further. This view has not only not been challenged, but some of our sharpest critics—and I refer to the London and Cambridge Bulletin—positively endorsed what I have just said. It wrote in January,
There appears to be no great difficulty about managing demand if the period 1972–76 is considered as a whole.
Perhaps I might add that the Government accept the broad proposition that the growth of public expenditure, in anything more than the short term, must not exceed the rate of growth of available resources unless we deliberately aim to increase the share of resources absorbed by the public sector and are prepared to face the prospect of consequential increased taxation. That is not the policy of this Government. It was the policy of our predecessors and it is clear that it

would be their policy if they ever returned to office.

Mr. Robert Sheldon: Mr. Robert Sheldon (Ashton-under-Lyne)rose—

Mr. Jenkin: In passing, their policies entitle those on the Government benches to treat with a good deal of cynicism the charges made by the right hon. Member for Leeds, East that we are spending too much. Nobody is much impressed when it is Satan who is rebuking sin.

Mr. Sheldon: Obviously it is difficult to reply to criticism of the kind made by the Expenditure Committee without a debate specifically on the subject. However, there is one particular point to which the hon. Gentleman must address himself. The main criticism of the Expenditure Committee was not over the period as a whole but for the period 1973–74, when for one year the Government increased public expenditure by £1,200 million, only £200 million of which was for counter-cyclical reasons.

Mr. Jenkin: The hon. Gentleman, whilst making his intervention, wags an admonitory finger at me. I agree with him that these are difficult, complex and technical matters. The hon. Gentleman presided over the general sub-committee which produced the report, and its criticisms have been widely reported in the Press and have caused the Government some embarrassment. I believe its criticisms to be misconceived and I must be allowed to develop my case.
The second general point I wish to make, and again I do not think there will be much general disagreement, is that within the broad trend of spending short-term fluctuations are entirely appropriate as part of the Government's overall management of demand. As recently as last July the Select Committee supported that proposition.
Thirdly, continuing measures are needed to achieve a better balance between the different regions in the country. I do not believe that these three propositions are challenged anywhere in the House.
That being so, let me, coming to the point the hon. Gentleman has made, examine the recent additions to the spending programmes which formed the basis of his criticisms. I remind the House that these additions were made at a time when


unemployment was high and rising, when there was much unused capacity in the economy, and when both unemployment and spare capacity were particularly evident in the regions.
The bulk of the additional spending falls under three main heads. There is the short-term counter-cyclical spending to which the hon. Gentleman referred and which amounts to over £675 million in the two years 1972–73 and 1973–74. [Interruption.] It is £207 million for the one year 1973–74. Second, there are continuing programmes of assistance to the regions amounting to about £475 million in 1973–74 and quite deliberately continuing thereafter. Thirdly, there are improved social security benefits amounting to over £200 million in 1973–74 and continuing thereafter.
The committee's complaints are, of course, directed to the second and third of those headings. The committee does not quarrel with the short-term counter-cyclical spending. So what is our answer? It is, first, that the cost is acceptable and can be accommodated in the medium term. That is not disputed. Second, by their timing these additions have contributed, and are still contributing, to the general stimulus to the economy and have thus helped to raise growth and reduce unemployment. Third, the continuing regional measures are right and proper in themselves, not only because we still face, and will continue to face, an intractable problem of regional unemployment, but also because the way their demand effect operates is particularly valuable. Expenditure which brings idle resources into use does not add correspondingly to overall demand pressure.
Finally, the increases in social security spending have been warmly welcomed on all sides of the House. As my right hon. Friend said, we have yet to hear any criticisms of those.

Mr. Sheldon: The House will obviously understand that it is rather difficult to reply to charges of the kind the Chief Secretary has made without a debate on this subject. I say this in extenuation of my rising again.
The House will note, too, that the hon. Gentleman has accepted that the main criticism of the Expenditure Committee was that in this one year—1973–74, which was decided in 1972–73—there was an in-

crease of £1,200 million in public expenditure, only £200 million of which was for counter-cyclical reasons. The House will notice the admission which has been made by the hon. Gentleman.

Mr. Jenkin: Very well. The hon. Gentleman has made the same point twice. Surely he will not now expect me to give way to him again. I have explained to him what the nature of the additional spending is. I have also explained why I believe it was justified in all the circumstances.
I come now to the second leg of the hon. Gentleman's committee's criticism, where the Committee said,
By implication at least the Government ignored the likely impact on the crucial intervening years 1973–74 and 1974–75.
I find it very puzzling to see how, in the light of the evidence it received, the committee could have come to this conclusion. I can only assume that there was some misunderstanding of what the committee's witnesses were saying. The House must remember that Treasury officials were giving evidence to the Select Committee towards the end of January after the date of the Budget had been announced and therefore in the pre-Budget purdah period. The two years in question are the two years covered by the Treasury's normal short-term forecasts and therefore the Treasury witnesses quite rightly felt themselves constrained to silence by the rules of Budget secrecy. The House will recollect that in the public expenditure debate on 7th February I made exactly the same point.
That is not to say that the Treasury witnesses were just content to be silent. On no fewer than six separate occasions when answering questions from the General Sub-Committee about these two matter the leading Treasury witness explained that he could not comment on the points being put to him because of Budget secrecy.
Let me give a few examples. The witness really could not have put his point more clearly. For instance, at question 48 he was asked by the hon. Member for Ashton-under-Lyme (Mr. Sheldon) about personal consumption in the year ahead. Mr. Baldwin replied,
…that question takes us into matters of short-term economic management where we are under some difficulty in giving you useful evidence.


When pressed at question 49, Mr. Baldwin said,
ֵ I cannot take the discussion on budgetary policy which might or might not affect the policy of growth in the next few years any distance.
At question 50 Mr. Baldwin said,
I do find myself in some difficulty because the situation that will arise in the months to come will be affected by the decisions to be announced no doubt on Budget Day. …
The Select Committee did not let go, however, and pressed Mr. Baldwin again at question 52, in reply to which he said,
If I were to say 'yes' to that I would be in a position where it could be said I had forecast the action to be taken on Budget Day, and therefore I am giving no answer whatever.
I could go on and quote other answers, but perhaps I have said enough to make my point. In the light of the six separate refusals for reasons of Budget confidentiality, reasons which I would have thought were well understood by right hon. and hon. Members on both sides of the House, it remains very puzzling how the committee felt able to draw the implication in paragraph 10 of its report that the Government ignored the intervening years 1973–75. Certainly in these circumstances it seems a very slender thread on which to hang the serious criticisms which follow in paragraph 11. This is why I said earlier that I think that the committee has hardly been fair to itself or to its witnesses.
Nevertheless, the committee drew that implication, and on it based the third leg of its attack—namely, that as a consequence of this alleged ignoring of the impact of public expenditure in these two years, there will have to be a sharp cut-back in personal consumption, perhaps to no more than a 2½ per cent. annual increase—significantly below the growth of output.
The committee, in coming to this conclusion, drew on a short-term forecast supplied to it by its specialist adviser, Mr. Godley, itself based on material provided by the Department of Applied Economics at Cambridge. Forecasting is, as the House knows, an uncertain art and I concede of course that there is room for different forecasts.
All I can say is that my right hon. Friend the Chancellor does not accept the Godley forecast. Still less does he

accept the conclusions which the committee drew from it. The Government's own forecast is contained in the Red Book, and if the House will refer to Table 4 it will see that we see a different picture from that painted in such sombre colours by the Select Committee. Percentage changes at annual rates are given for all the main components of demand for a variety of 12-month and 18-month periods. In every single case the forward figure for the growth of GDP exceeds the figure for the growth of total public expenditure. In every single case the figure for the growth of consumers' expenditure is over 4 per cent. per annum, significantly above the average of the last decade or so. Indeed, for the period which corresponds most closely to that taken by the committee—second half 1972 to first half 1974—personal consumption at 4·3 per cent. annual growth is only 0·9 percentage points below the growth of GDP.
We therefore reject the committee's conclusion that our public spending over the next 12 to 18 months will constrain personal consumption to a rate significantly below that of total output. It just is not true.
If, as a nation, we accept the discipline of the Government's counter-inflation policy, there is no reason why standards of living should not rise at a rate which is not only satisfactory in itself but would be significantly higher than the average for the last decade.
I must apologise to the House for having gone into this matter in some detail, but I hope that I have gone some way at least to answer the criticisms of the Select Committee and to convince the House that public expenditure is not out of control. In fact the reverse is the case and my right hon. Friends and I are determined that it shall remain that way.

Mr. Bruce-Gardyne: What is my hon. Friend's estimate now of the proportion of total resources pre-empted by the public sector during the last year, and what is his estimate of the likely proportion to be pre-empted by the public sector in the year ahead?

Mr. Jenkin: My hon. Friend was kind enough to give me notice that he might raise that question. The answer is that public expenditure on goods and services,


including nationalised industry investment, will be just under 30 per cent. of GDP for the current year and we do not anticipate that the figure for 1973–74 will be significantly different.
I want to come to the subject of unification, because the right hon. Member for Leeds, East had a good deal to say about this. He said that it was his first speech as Shadow Chancellor. I am sure that the whole House will wish him many more.
My hon. Friend the Member for Bolton, West (Mr. Redmond) accused the right hon. Gentleman of talking the pound down. With respect, my hon. Friend was being a little unfair. The right hon. Gentleman certainly talked the pound down very effectively last year, but since then I am happy to say that the pound has learned not to pay the slightest attention to anything that the right hon. Gentleman says. I want to take up only one point on which he dwelt on Wednesday. That concerns the unification of income tax and surtax.
On Wednesday—in the House and on television that night—the right hon. Gentleman was beating his depressingly familiar tom-tom about bonanzas for the rich. The fact is—the right hon. Gentleman knows it as well as anyone—that the reform of the personal tax system is something which was long overdue. The right hon. Member for Birmingham, Stechford openly regretted that he was unable to do it. I do not know—because I am not allowed to know—what particular administrative impossibility it was which precluded him from doing it. But of one thing I am sure—that a major reform of this kind is bound to be spread over several years. We legislated in 1971; we fixed the rates of tax in March 1972; the Inland Revenue then had to recode every PAYE taxpayer—and that process alone took many months.
The new system comes into effect this year. In place of two taxes we shall have one. The surtax office will disappear. In place of an illogical jumble of reliefs and allowances—different for income tax and surtax, different for earned and investment income—we shall have a simple basic rate, allowances worth their face value, a simple and logical scale of higher rates and a straightforward investment income surcharge. No one doubts that the

new system is infinitely better than the old.
Why has my right hon. Friend the Chancellor succeded where his predecessors failed? I believe that the most significant reason, perhaps, was his readiness to commit himself to the reform, to set the machine in motion and not to stop it until the job was done. That is why we have not sought either to try to delay the introduction of the scheme or to tinker with its details. Quite apart from the appalling administrative difficulties that delay would create, to draw back now would cast doubt on the entire reform.
Nor is there any reason to draw back. The scale of higher rates and the investment income surcharge are fair. Top rates of 75 per cent. on earnings and 90 per cent. on investment income are high enough—higher than almost all our main competitors' rates, and much higher than most.
The differential between earned and investment income has been ludicrously wide. I take, for example, a retired man on £4,000 a year: the marginal rate on a pension of that amount is just over 30 per cent.; the marginal rate on the same income from savings is over 60 per cent. From April, it will be 30 per cent. and 45 per cent. respectively.
For those with modest savings, the surcharge will not apply. One cannot urge people to save and then penalise the results. A year when savings will be of critical importance to monetary policy is not a bad year in which to improve the incentive to save. Nor is it, as the right hon. Member for Leeds, East contended, a bonanza for the rich. All I can say is that, if it is, very few of them will notice it.
Last Wednesday, the right hon. Gentleman was interrupted by my hon. Friend the Member for Bosworth (Mr. Adam Butler), who asked the right hon. Gentleman whether he was aware that all surtax payers this year and for the next two years will be paying more tax. We got a surprising answer. The right hon. Gentleman said that he was aware of that. I must say that that was not immediately apparent from the rest of his speech. I doubt whether anyone who listened to his broadcast that night realised that he was aware of the fact


that many of those with large earnings will actually have less money to spend for the next three years.

Mr. Denis Healey: Is not the hon. Gentleman aware that the spreading of 1972–73 surtax over the next three years means that surtax payers will get an interest-free loan from the Inland Revenue which they pay off over the next three years in a steadily depreciating currency, when the ordinary wage earner has to pay his tax from week to week and from the moment that he is earning it, and if he overpays he is making an interest-free loan to the Exchequer?

Mr. Jenkin: I thought that the right hon. Gentleman was aware of that fact. That is what he said in the debate. So that the whole House should be aware of the same figures, what the right hon. Gentleman says that he was aware of is this: a single man with PAYE earnings of £10,000 a year this year has £6,141 left after meeting his tax liabilities during the course of this year, that is, tax that becomes due in this year. For each of the next three years, if he takes advantage of the maximum spreading, he will have not £6,141 but £6,093.
At £20,000 he is left with £9,378 this year. He will be left with almost exactly £1,000 less in each of the next three years. At £30,000 he is left with £11,842 having paid £18,158 in tax. For each of the next three years his tax bill will be £20,509.

Mr. Healey: Will the hon. Gentleman address himself to my point? With great respect, he has not denied the fact that this extra tax which the man is paying is tax which, if he had been an ordinary wage earner, he would have paid last year. This is money owed to the Exchequer. Alone among the British population, the surtax payer is being allowed by the present Government to pay up to four years late without paying interest on the loan being made by the Exchequer.

Mr. Jenkin: I chose my words very carefully, because it is important to get this exactly right. It is the question of the tax that becomes due in the current year.—[HON. MEMBERS: "Answer"] The question that I would ask the right hon. Member is this: is that man paying more tax next year or less? I do not see how, in the face of these figures, the right

hon. Gentleman can go on with his foolish jibe about bonanzas for the rich.
The right hon. Gentleman spent most of last year arguing that the benefits of unification went entirely to those with more than £5,000 a year. It took us the best part of a year to make him realise that most of the benefit goes to those with incomes of less than £5,000 a year. This time I thought the right hon. Gentleman was doing a little better. In answer to my hon. Friend the Member for Bosworth, he admitted that he was aware that many surtax payers will face bigger tax bills in the next three years than they faced last year. But I must confess that, where the right hon. Gentleman is concerned, I am not optimistic that his progress will be sustained. I am willing to wager that long after we have parted with the Finance Bill, he will go on talking nonsense about bonanzas for the rich.
Most impartial commentators have recognised that, in making his Budget judgment, my right hon. Friend faced a uniquely difficult task. The sheer range and diversity of the advice offered to him was evidence of that. Since Budget Day, the comments have been no less diverse. But on one thing most people seem to agree: my right hon. Friend's decision to continue to go for growth is absolutely right. For it is only by sustaining the higher growth rate now being achieved that we can create the resources needed to fulfil the ambitions of our people, both for a higher standard of living and for a higher quality in the public services. It is growth which will be the key to more stable prices. It is growth which will stimulate higher investment. And it is growth which will enable us to do still better for the old, the sick, the disabled and the low paid.
Last autumn growth was threatened by run-away wage-cost inflation. The Government acted with great resolution, and already inflationary expectations are subsiding. In recent weeks growth has been threatened by instability in the international monetary system. The prompt collective action in which my right hon. Friend played such a notable part has averted the immediate threat.
Growth is now threatened by disruption in industry and in the public service—and here the remedy lies with ordinary men and women who must surely see


that by taking industrial action in this way at the present time they only do damage to themselves, to their industries and the whole nation. They must know that the Government cannot conceivably give in on the phase 2 limits.
As I understand that the right hon. Member for Bristol, South-East (Mr. Benn) is to reply, may I say that I was astonished to read the report in The Times of what he is inviting his right hon. and hon. Friends to do in this regard. In an article in The Times of last Friday, under the heading
Mr. Benn urges Labour to join TUC in protest
the political commentator wrote
Mr. Wedgwood Benn has astonished some of his Shadow Cabinet colleagues by suggesting joint action between the Labour Party and the TUC in the unions' one-day industrial protest against the Government's counter-inflation measures.
We always knew that the right hon. Gentleman had populist aspirations, but how, after making proposals of that sort, he can regard himself as a democrat passes my understanding.
We cannot allow inflation and disruption to strangle growth. My right hon. Friend's Budget is again going for growth. It is an honest Budget, it is a courageous and fair Budget, and it deserves to succeed.

4.40 p.m.

Mr. Anthony Wedgwood Benn: I have heard Treasury Ministers before presenting the technical complexity of Budgets with skill and courtesy, and I accord to the Chief Secretary the tribute that one would accord to a man who is capable of doing that. But if he believes that in his exchange with my right hon. Friend the Member for Leeds, East (Mr. Healey) about the effect of reunification on the distribution of tax in this country he is capable of influencing the British public at large, particularly in his latter remark which he made about industrial disruption, he really cannot understand the nature of the problem which is now facing the country.
I recommend to my right hon. and hon. Friends that tonight we should vote against Budget Resolution No. 14 which deals specifically with the reunification scheme. The reason for that is that we believe that the dominant social effect

of this change will be divisive in an extremely difficult situation which the Chief Secretary shows no signs of understanding. It will work against the declared objective of a voluntary policy to deal with inflation; it will work against the interests of working people; it explains a great deal of the present unrest that has overhung the week of the Budget debate; and it will, therefore, harm the broader prospects, both economic and political, for the future of this country.
Therefore, I address myself principally to the broad social and political effects of the Budget changes. May I say one word first on the problems of the economic management to which the Chief Secretary made a passing reference. Nobody listening to the Budget Statement last Tuesday for one moment thought that the Budget Statement would be the last judgment made this year. With a very rapidly changing international monetary situation, with solutions lasting, sometimes, for only a fortnight, and with an extremely difficult domestic situation, the Chancellor was able to reach only a preliminary view. It is quite clear that price inflation will continue. The balance of payments is likely to deteriorate sharply. Investment prospects are still based on hopes which have been raised in the past and were not realised, and even if the growth rate can be sustained against all these problems, the level of unemployment is unlikely to fall to an acceptable level.
I want to come to the effect of these policies on the centrepiece of Government policy, which is not the Budget but the Counter-Inflation Bill. The Chief Secretary, particularly in his concluding remarks, made it absolutely clear, as did the Chancellor in his broadcast after the Budget, that so far as he is concerned the counter-inflation policy backed by statutory powers represents the main instrument of economic management in his mind this year. Even the statutory policy requires a degree of public consent and support, and the economic factors which we are discussing in this debate matter primarily because of the effect that they will have on public attitudes towards the policies contained in the Counter-Inflation Bill.
I want therefore to look at some of the factors, including reunification, and the


effect of this on the distribution of incomes, in terms of the likely effect on public attitudes. I take, for example, the rise in prices that has occurred, continuing even during the freeze. I quoted some figures last Monday. My right hon. Friend the Member for Leeds, East quoted some figures on Wednesday, and the consolidated figures since June 1970 are worth putting on the record: all foods 29·1 per cent. up; processed foods 17·8 per cent. up; fresh foods 43·5 per cent. up; meat 45·6 per cent. up, and fruit 92·4 per cent. up.
The effect of rising prices on the wives of trade unionists now faced by the counter-inflation policy controls represents one of the major forces behind the wage claims which are now coming through in industry. If we take the increases in rents due under the Government's Housing and Finance Act, these are increases in prices working through under Government direction. If we take rates, and if we accept the Sunday Times estimate, despite the measures announced by the Chancellor, many people will be paying from 40 to 75 per cent. higher rates this year; if we take mortgage payments and the possible effect of an increase in building loans to 9½ per cent.; if we take VAT and contrast it against the remissions planned by the Chancellor two years ago and confirmed yesterday, we get some idea of the pattern of the conflict which lies behind the present industrial unrest.

The Financial Secretary to the Treasury (Mr. Terence Higgins): indicated dissent.

Mr. Benn: Of course, that is the explanation. I have no doubt that the hon. Member, as a good constituency man, has met and talked, as I did on Friday for two hours, with the hospital workers. They talk about the Budget and its effects. If the hon. Gentleman thinks that he can fool the hospital workers and other lower-paid workers, as well as his own civil servants, with the sort of figures which he has given today, he simply does not understand the nature of the problem facing the Government.

Mr. Patrick Jenkin: Would the right hon. Gentleman answer the question which his right hon. Friend the Member for Leeds, East (Mr. Healey) conspicuously failed to answer? Will the surtax payers

he paying more tax in 1973–74 than in 1972–73, or will they not?

Mr. Benn: The hon. Gentleman cannot fool the House, because he knows that surtax falls to be paid in a year later than the year in which the income comes. I would advise the hon. Gentleman, who is a very clever Treasury Minister, to think about the British public who watch television, and the shop stewards who read the Financial Times, and who follow what happens and who know that the Government have consciously chosen to lift the tax burden from the rich and boast about it at City dinners. If he thinks that has not got through to the lower-paid workers, it is not surprising that the Government are faced with a difficult industrial situation.
The answer to the question is simple. The tax cuts were devised to give money to the better off, and they will do so as those cuts work their way through. The Chancellor and his Treasury Ministers must be very foolish indeed if they suppose that to one audience they can boast about higher incentives to the richer people, and at the same time expect the lower-paid workers to believe that a real sacrifice is being made by the surtax payer. It is not true. People do not believe it to be true, and if that is the basis of the Government's appeal to the public it is not surprising that there is industrial unrest.

Mr. William Clark: Does the right hon. Gentleman think that it is fair enough that 90 per cent. of a person's income is taken from him in taxation, or does he think the percentage ought to be higher?

Mr. Benn: If the income is derived from some of the speculation that has been encouraged by the Government in land, 90 per cent. is absolutely right. If the hon. Gentleman—and I will be happy to give way to him again because this debate is long overdue—thinks that what is wrong in this country is that the margin of income between the highest and the lowest is too narrow, he does not understand what the trouble is about.

Mr. William Clark: The figure of 90 per cent. has nothing to do with speculation. The right hon. Gentleman should not drag a red herring across the trail. I asked a simple question. I asked whether he thinks that 90 per cent.


tax paid by a person with a high income is too low or whether he thinks it should be more.

Mr. Benn: The hon. Gentleman knows that 90 per cent. is a marginal rate. It is not an average rate. He may also know, if he follows these matters, that a man has got to get £8,000 a year before he has to pay a 50 per cent. tax rate, whereas with the "poverty surtax" as it is called some people can lose 50 per cent. of their increase when they are still below the supplementary benefit level. Therefore, if the hon. Member believes that he can sell the Government's policy to the public on the basis that the gap between rich and poor is too narrow, he simply does not understand what is going on. The Budget debate, and the points that have emerged from it, may therefore have some relevance.
Let me give the hon. Member figures, if he challenges me. A woman ward orderly working in a hospital on a 40-hour week is paid a gross sum of £16·08. Her take-home pay is something over £13. Does the hon. Member believe that to be fair? Does he believe that to be a reasonable reward for someone working in the public service who has never been engaged in an industrial dispute before and who does not benefit from the tax concessions made in the Budget? Of course it is not. Let me cite another case. A person underwent four years training for City and Guilds qualifications to be a hospital cook. The basic pay is £19·80. A kitchen porter works a 40-hour week for £18.
The truth is—and this is the change between this year and every other year—that whereas previously the Government have been able to conceal the tax cuts under one heading, and deal with their attitudes towards incomes under another, the public are now putting the two points together. That is the change that has taken place. There is another point that I would mention to the Treasury Ministers. The new militancy of the lower paid is the product of an understanding of these two relationships and the bearing of one upon another.
Let me put another point to the Chief Secretary. He may have noticed, that unlike previous industrial disputes the Press and the television are not now able to find the wives of strikers to come for-

ward and say that they wished their husbands were not on strike. By a combination of their budgetary policy and phase 2 of their counter-inflation policy, the Government have brought the families together to recognise that they have to defend their own interests.

Mr. Adam Butler: We are dealing with a most important point. I say to the right hon. Gentleman what I said to his right hon. Friend on Thursday, that I am sure that he would not wish by anything he says here or outside the House to stir up industrial unrest more than it is at present.

Mr. William Hamling: The Government do that.

Mr. Butler: Will he now come absolutely clean and admit that surtax payers, whether they are earning £10,000, £15,000 or £20,000 a year or more, will actually be paying more tax this year, next year and the year thereafter and that therefore they will not be benefiting from the Budget proposals but will have a lower take-home pay as a result?

Mr. Benn: If the hon. Member for Bosworth (Mr. Adam Butler) who follows these matters carefully, seriously thinks that he can persuade the public that the surtax payer has been put at a disadvantage, even allowing for the point that the hon. Member made, by his Government and notably by the Budget he has missed the point.
May I read an extract from a leading article in The Times which I did not mean to quote but which exactly provides an answer to the question. The article concerns the situation in Bermuda following the tragic murder of Sir Richard Sharpies. The passage makes a reference so relevant to what we are discussing that I should like to read it. It is an incredible statement:
Tourism, however profitable, unfortunately breeds discontent and social tension—and not only in the West Indies—when the local people, taking employment in the hotels, see at close quarters the disparity between the tourists' standards (temporary as these may sometimes be) and their own. The tourist generates both greed and a sense of national identity where neither prevailed so strongly before his advent.
When the average workers in this country—and, even more important maybe, the lower paid who have lived in a sort of industrial dungeon from which they


did not feel they could emerge—learn what the Government are giving to the rich, it creates a whole new political situation, and it is to that issue that I want to direct the attention of the House.
Confronted with this situation the Government have responded by trying to restrict the freedom of the trade union movement. The Industrial Relations Act was the first shot in the battle. Then, through the Counter-Inflation Bill the Government have laid down an upper limit and have therefore assumed the rôle of the employers by limiting wage increases. They then make industrial action illegal and then they say that decisions about wages are made not by Ministers but by a Pay Board not accountable to Parliament. Then they bring the courts in to enforce it and then they wheel out the Lord Chancellor like Big Bertha to make a speech about patriotism.
That is the Government's answer to the militancy created by Government policy. That is what it is all about. When the Chief Secretary speaks about it he knows that he is dealing with militancy in industry. If workers take industrial action, that is extra-parliamentary action and he condemns it. If the workers reflect their view through a joint statement with the Labour Party he regards that as putting the Labour Party at the mercy of the TUC. Whichever way the people of this country act to correct the injustices from which they suffer, the Government have a way of blocking off.

Mr. Patrick Jenkin: Mr. Patrick Jenkin rose—

Mr. Benn: I shall give way when I am ready and not before. The Government have tried to put the clock back 100 years and that explains the reaction. It is not a matter of law and order but of injustice and inequality long concealed from public gaze that the Government now have to face, and it is by that test that the Budget must be assessed.

Mr. Patrick Jenkin: If the right hon. Gentleman expresses these views with such great vehemence why was it that his colleagues in the Shadow Cabinet refused to support him in his idea of a one-day protest with the TUC?

Mr. Benn: The matter was not put for decision at the Shadow Cabinet and if the hon. Member believes everything he reads in The Times that also explains his difficulty.
The real issue facing both sides of the House is that even a statutory policy requires consent. Therefore, the Budget has to be judged by the extent to which it contributes towards making that consent possible. When the Government last autumn at Chequers claimed to try to get a voluntary policy, they drew from the trade union movement the offer of a voluntary policy if the Government were ready to provide statutory price control. The Government chose last October to reject the offer of a voluntary policy on wages in return for statutory price control.
The basic fact is that the Government claim even now that phase 3 will be operated on a voluntary basis, but phase 3 cannot be voluntary unless there is the combination of a statutory price control and also a much greater measure of social justice. That is the way the public see the prices and incomes problem and one day the House of Commons will have to learn to see it that way, too.
May I put it even more crudely and vulgarly to the House. This is a problem about the prices and incomes policy: how can those earning over £5,000 a year—and that includes Ministers in both Governments because of the scale of ministerial salaries—earn the right to say to those earning far less than £5,000 a year, who have now acquired a bargaining power to improve their conditions, "Wait, because if you push your bargaining power you may create serious inflation"?
That is the problem. It has never been put in that way in the House, but that is the way in which it is seen by the public as a whole. Those earning over £5,000 a year are the managing directors and the chairmen of the boards of companies who are responsible for industrial negotiations. They are the civil servants who devise the incomes policies; the Ministers of both parties who have to advocate those policies; the broadcasters who comment on incomes policies; and the editors who write the leading articles about them.
I return to the The Times, which had a leading article on Saturday—[Interruption.] I am talking about a leading article. That leading article, presumably written by the editor, called for "heroic" measures in incomes policy. The writer rebuked my right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) for not being heroic enough. I rang up The Times today to find out whether the editor's salary was published. Of course, it is not. It is not even made known for others to comment on. The salary of the Director-General of the BBC is not made known.
The British public will no longer, or not for much longer, be prepared to accept lectures from well-paid people with high tax reliefs granted by the present Government, people whose salaries are individually negotiated, who enjoy a large number of personal perquisites, who have the advantage of secrecy, so that people do not even know what their salaries are, telling the large body of workers, including many lower-paid workers, that they must accept restraint.
That is the change between the present Budget debate and many of those in the past. The relatively small number earning over £5,000 a year—about 250,000 of them—are talking to a body of people who do not enjoy anything like the same living standards. They are talking to 4·6 million people living on supplementary benefits; to the working poor, 50,000 men who are at work, and still earn less than supplementary benefit levels; to 140,000 on family income supplement; to engineering workers whose basic rates are such that a skilled engineering worker will reach only £25 a week next August, although actual earnings in the industry are much higher. They are talking to large bodies of workers who do not enjoy the same advantages, and who will not accept what the Government say as the only solution to the problem.
I even take the claim that is sometimes argued to be unpopular, the Ford workers' claim for an extra £10 a week. But if productivity merits a £10 increase for the Ford workers, is it so very obvious that it is more socially just that all the benefit of that productivity should be left to Henry Ford to invest his money in Spain, where the trade unions are illegal and he will obtain a better return on his investment? And how does it so ob-

viously help the lower-paid worker if the Ford worker is restrained by an Act of Parliament and Mr. Henry Ford can move his capital abroad?
Those are the issues that have been skilfully concealed by technical complexity, by the way in which Ministers explain the technical aspects of budgetary problems. The eyes of the Chancellor light up as he discovers a new detail of an adjustment to an inheritance tax that he can make for the benefit of his own supporters that he has been able to conceal in the past. [Interruption.] That is what it is about. Let us have a little truth in the House. Why do hon. Members imagine that £2 million, £3 million or £4 million was put into the Government's election campaign by business people, if they did not expect a return on it in successive Budgets?
The plain truth is that the time when it was possible to cover up and conceal what the Government—any Government—has done is over. We are at the end of cosmetic politics, when it was possible to keep things separate and hope that the public did not understand what was happening. The hon. Member for Bosworth is the last of the cosmetic politicians. He rose with a little pancake make-up to try to persuade my hospital workers in Bristol that it was the rich who were being taxed by the Chancellor and that they were very well off. They know it is not true. That is the change that has occurred this year.
The argument that my right hon. Friends and I have advanced for social justice over many years acquires a new importance, because without social justice it is not possible to buy consent for the Government's counter-inflationary policy. The only way in which the Chancellor can realise what he claims to want—that there should be support for a genuine counter-inflationary policy—is to take some notice of the joint statement of the policies advocated by the Labour Party and the TUC.
If the Chancellor does not like extra-Parliamentary action, if he does not like industrial disputes, let him listen to the demands of working people reflected in that joint statement calling for permanent statutory price controls; food subsidies on essentials; a rent freeze covering the Housing Finance Act; a special tax on gains from land speculation; a larger


council house building programme; a redistribution of income in favour of the less well-off at the expense of those fortunate enough to pay 90 per cent. on a part of their income; a phasing out of social charges; a higher rate of pensions towards the £10 and £16 basic for single people and married couples; a reduction of all defence expenditure in the direction at any rate of the proportion of GNP devoted to it by other Common Market countries; control of capital movements, to deal with the Ford point to which I referred; good regional policies, including the maintenance of regional employment premium; and a greater degree of accountability of industrial power. The only way in which the Government can realise their objectives is by meeting the demands of people whom they are now trying to keep down by the use of the law.
We face a genuine crisis in our mixed economy. I realise, and I think the House realises, that the policies I have advocated, the policies that have emerged from the trade union movement and the Labour Party together, would involve even more fundamental change. But I must thank the Government Front Bench for making it easier. When some years ago we advocated such policies, the arguments thrown against us were that to carry them out would involve controls. Well, we have controls. It was argued that it would involve inspectors. We have inspectors. It was argued that it would involve direction of the economy and the end of the market economy. The market economy has at any rate been put on ice during phase 2. It was argued that it would affect profits. Profit margins are in any case now to be controlled. It was argued that it would affect investment. Even in two-and-a-half years of government in which they have pursued absolutely freely the policy they wanted, the Conservatives have totally failed to bring about the investment that they know to be necessary, even though they encouraged high profits wherever they had the opportunity to do so.
I do not say that the Chancellor has stolen our clothes, but he has obligingly taken off his own. When the debate against democratic Socialism takes place, he will, in Aneurin Bevan's phrase, go naked into the conference chamber, because the managed economy has already been conceded. It is a managed

economy in the interests of the working people that is now the main item on the agenda.
In the absence of a readiness to adopt those policies, the Government have only one line open to them. It is to intensify the campaign against the trade unions and to try to develop the concept of militancy as spreading so widely throughout our society as to endanger the fabric of society. That is untrue. The civil servants, the agricultural workers, the gas workers, the hospital workers, all people now engaged in seeking to defend their standard of living, are people who are demanding justice and no more.
This Budget will be remembered for a change in public attitudes towards the rôle of equality in society. I put it to the House on behalf of my hon. and right hon. Friends that we need a clear commitment to a just society and we need to resolve to use our powers to get it. We must have an end to confrontation, to concealment, to the deliberate attempt to confuse people into thinking that they are better off than they are.
There is no guarantee that new policies will solve problems as difficult as those confronting us. There is no one in the House, in Government or in Opposition or among the Liberal Party, who can say with any measure of absolute certainty that if the policies they advocate were put into effect the problem of inflation would be easy to overcome. I and my right hon. Friends believe that the best chance of success is to talk plainly and honestly to the people about the nature of the problem, to listen to what they are saying to us and to respond to them.
I do not believe that the present policy can succeed, for one reason. It is that the Government have absolutely failed to give to the people any vision of any sort or kind of a society that will have anything offered to it but a measure of growth to be bought at the expense of authoritarianism and a diminution in democratic rights. The vision of their manifesto of 1970 is dead. The vision of Europe, offered as a panacea to all of our problems, has been shown not to be panacea but to present new problems. What the Government must offer to the people is something better than deepening inequality of a kind which the Chief Secretary has contributed to achieving this year. Until some Government


call forth the best in the British people that Government will not gain the response, which we must have, if we are to solve this or any other problem.

5.12 p.m.

Mr. John Hall: I always listen to the right hon. Member for Bristol, South-East (Mr. Benn) with the greatest admiration. He generally builds up an absolutely brilliant argument which seems to be unanswerable—except that it is generally based on an entirely false premise. The words come out in an apparently unceasing cascade and to such an extent that most of us are bemused at the end and find it difficult adequately to respond.
As far as I could make out, the right hon. Gentleman's speech consisted in large part of a reintroduction of much of the speech he made last Monday on the Pay and Price Code. It was none the worse for that, because many of the things he said then were matters which should have our consideration. He listed for the second time in seven days the Labour Party's policy for the future which, if it were ever implemented, would mean as far as I can ascertain a sustained increase in wages—certainly no check in that increase—but a holding of prices in such a way that it would inevitably mean that goods would disappear from the shops, expansion would cease and there would be a general falling-off in industrial competition. We would then find that the situation would leave us economically much weaker than we have been for many years.
The main object of the Opposition in their comments on the Budget is to concentrate upon the contrast between what it is said is being asked for by the trade uionists and the "give-away" to what we call the rich man. By "give-away" they mean the Government's decision to cease taking quite so much at some time in the future from some of our taxpayers. The right hon. Gentleman avoided the challenge from this side of the House about whether surtax payers would pay more or less or even the same this year or next year as in the past. He pointed out that the new rates did eventually produce a benefit for the surtax payer—and that is quite right. If we consider the normal surtax payer it will be seen that he will be called upon to pay two lots of surtax in the current year the

second of which arises from the new higher rates of PAYE. If he were asked to pay it all in one year, it would amount to a considerable sum, especially for the high surtax payer. For that reason the Government were prepared to allow such persons the concession of paying that extra burden of taxation over a period of three years depending upon the amount they are liable to pay this year.
That means that very few surtax payers will find any benefit at all from the present reductions until the tax year 1976–77. I would not say that that was a handout to the rich. That will not stop hon. and right hon. Gentlemen opposite from saying this whenever they can. They describe their attitude as the politics of fairness. It is the politics of envy. They are endeavouring to stir up the fires among trade unionists, who are demanding higher wages by saying, "What you are demanding is quite reasonable, quite a small amount when you consider the amount that has been given away to these rich people. It may be true that they may not be getting anything worth while for some years but nevertheless how can the Government contrast the amount for which you are asking with the amount which they are giving away?" This is an appealing thing to say. If I wanted to go on to the soap box in my constituency I have no doubt that there would be people who would cheer me to the echo if I were to use that kind of argument. It is easy to get people to rise to such an approach.
I imagine from what the right hon. Gentleman said that he almost envisages the time when we are all paid the same, because only then would anyone have the right to comment on another person's pay. He argues that if a man is earning £5,000 a year or more he is in no position to comment on the demands of another section of the community which may be less well-off. Ergo, in the end, to comment effectively on anyone's income we must all be paid the same. In a Communist organised society I suppose that might be possible. But, looking at the Communist countries, it does not seem to work. The differentiation between the top and the lower ranks in the Communist countries seems far greater than in Western democracy. The prospect offered by the right hon. Gentleman is not likely to be realised. The only place


I suppose that Socialism, as the right hon. Gentleman understands it, could be realised is in Heaven, but it is said that there it is not necessary, while in Hell they have it already.

Mr. Benn: It is also advocated by the Church militant here on earth.

Mr. Hall: The Church militant advocates a number of things and it is always rather difficult to know precisely what they are because the Church unfortunately speaks with many divided voices.
I turn now to the Budget. There has not been much concentration upon it as such although there has been much talk about its philosophy and long-term effect. One of the problems which all Governments face today arises from the technique which has developed in recent years of instant comment on every important subject debated inside this House and outside it. The Budget is no exception. It was subject to instant comment by the Press and TV. Members of Parliament and others of all political persuasions or none are rushed to the television to give their views about the Budget. The papers, especially the weekend Press, have been filled with articles written by learned economists and economists not so learned, expounding their views about whether the Budget is good, bad or indifferent.
In many instances the instant commentators get things wrong which sometimes makes things rather difficult because it produces the wrong impression in people's minds and that takes a long time to eradicate. Apart from that most of the comments seem to cancel each other out. The Chancellor and some commentators have claimed that the Budget is neutral. Other right hon. Gentlemen and economists have claimed on the other hand—the right hon. Member for Devon, North (Mr. Thorpe) is a good example—that the Budget was deflationary. Others have said that it is inflationary. "You pays your money and takes your choice". If I were asked to come down on one side or the other I would say that it is inflationary, despite the fiscal drag to which the right hon. Member for Devon, North referred. It tends, if anything, to be inflationary, not because of what it does but because of what it does not do.
There is nothing positively inflationary in the Budget, but the very large borrowing requirement, to which my hon. Friend the Chief Secretary devoted considerable attention, could become, and some would say has already become, dangerously inflationary if the proposed method of financing it is not successful. My right hon. Friend the Chancellor of the Exchequer is aware of the danger, because he referred to it in his Budget Statement and has made it clear that if the suggested method of financing the borrowing requirement is not sucecssful he will take the necessary action—presumably by cutting back public expenditure, the plans already having been laid to that end, should it unfortunately be necessary.
It is always difficult to cut back public expenditure. It is often wasteful in effect. One can do it without waste only if the expenditure can be cut short in a comparatively limited period without too much waste of the previous effort. Thus, a cut back is to be avoided if one can. It is a pity that the rate of public expenditure has been allowed to grow to quite the extent it has. Much of it which we are asked to finance takes the form of loans and grants to private enterprise. For myself—and possibly I speak for many of my hon. Friends—I am rather allergic to grants and loans to private enterprise.
I am opposed to grants, especially those which are intended to persuade industries to go to areas which otherwise they would consider unsatisfactory. I am opposed to this even if the objective is to help bring down unemployment in such areas. The fact is that it destroys the economic judgment of those responsible for deciding how their private enterprise money should be spent, and they are encouraged to do things which, left to themselves and without financial incentive from the Government, they would not do. In the long term, such a system is undesirable and dangerous to the whole economy, although, of course, it may sometimes produce a short-term, but only a short-term, solution.
If we want to help development areas, it would be better to spend the money on developing and improving their infrastructure so that one is making them much more attractive to firms. There is another important feature in doing so—one is giving something of permanent value to a


development area and not something which may be transitory in character. The regional employment premium is an example of what I have in mind. It would be better to spend it in the way I have suggested than as an outright grant to private industry as a whole, in which there is a great risk.
The Government are committed to a policy of grants and loans to industry on a scale which is quite unprecedented. Indeed, if the present scale of grants and loans had been suggested by the Labour Government it would have aroused one or two comments from us. There is great risk that these injections of taxpayers' money will tend to destroy rather than strengthen private enterprise, which is something that hon. Members opposite would welcome but is not something that I would welcome.
I turn now to the question of interest rates. I am not particularly happy about the way we use ever-increasing interest rates as we do to control the growth of money supply. It can be of benefit. If we allow interest rates to get high enough, it will succeed in choking off demand for money, but in the meantime it is adding considerably to the inflationary pressure—the very inflationary pressure it is designed to reduce—because increasing interest rates will be reflected in the end in increased prices and increased costs and charges.
It may also, unfortunately, affect investment decisions. If the cost of new money becomes penal, many investments will be postponed until such time as interest rates tend to fall. At present, when interest is allowable for income tax relief, it is not quite so penal as it might have been, but it still has a considerable effect on investment decisions.
Of course, there is an alternative way of dealing with inflation—to let it rip. That may sound controversial but it is not quite so controversial as it sounds. If we let it rip, the only people we harm are those on fixed incomes, and the only other effect is to make it more difficult for us to sell overseas against foreign competitors whose rate of inflation is less than ours. It would mean increased prices, increased wages, with both chasing each other in cost, price or wage inflation, whatever one terms it, with compensations for those on fixed incomes or living on allowances.

Those who could not be compensated adequately are those living on their own savings or those on incomes not added to by Government largesse or pensions. One could not safeguard them.
However, in the Budget we have the introduction of new Government stocks which have to some extent a built-in hedge against inflation, albeit a small one. In one instance, there is the premium on conversion to another stock. This provides a small hedge. Thus, one can provide Government-sponsored stocks, with a built-in safeguard against a rise in the cost of living, into which people can put their savings, thus enabling them to maintain the value of their savings, quite apart from Government pensions and allowances.
What we could not do would be to safeguard our exports against compensation from overseas. If the rate of inflation rose too high, we would tend to price ourselves out of the market. Like the exchange rate, that would be a self-disciplining, however, because the rate of inflation in the end would be forced down to the level at which it would have to come in order for us to go on living. That is an alternative way of dealing with the problem of inflation, which has defied the efforts of both Conservative and Labour Governments and has, indeed, defied the efforts of all other Governments to solve.
I want to comment now on the decision to relieve all foodstuffs of tax. Here I refer to the £100 million which is not being put, through value added tax, upon confectionery, soft drinks and so on. We spend about £1,000 million a year on these products. It is interesting to reflect that we spend more and eat more per head of population on sweets and chocolates than does any other nation. I deplore giving further encouragement to the destruction of the nation's teeth, especially when we are also prepared to encourage water undertakings to put fluoride into the water to offset the damage done by the eating of sweets. The decision, therefore is self-cancelling. The money could have been better spent elsewhere—perhaps on supplementing the £10 million to be given towards rate relief. That would have been rather more useful and welcome.
I want to speak now about future Budgets. We have now had capital gains tax for a very long time. When in Opposition, I put down various amendments to successive Finance Bills to try to improve the tax. Over the years, we have heard many hon. Members opposite suggesting the imposition of a wealth tax. I do not know why they bother—we have it already. The capital gains tax is a wealth tax as it operates. One day, perhaps, bearing in mind the inflationary effects of recent years, we might be prepared to amend the capital gains tax to take that into account. If we do not we shall be eating into capital. The fact is that the capital gains tax is in effect a wealth tax, and not a capital gains tax.
I congratulate my right hon. Friend on the way he presented his Budget. It was a tour de force if ever there were one. Over the years, he will be recognised as one of the great reforming Chancellors of our time. He described this as a neutral Budget. I have described it as a small inflationary risk. Nevertheless, it is part of a concerted whole, and over the next year or two I believe that his strategy will be found to have paid off, and we shall see it reflected in the greater and increasing economic strength of the country.

5.30 p.m.

Mr. Roy Jenkins: The hon. Member for Wycombe (Mr. John Hall) gave some fairly muted praise to the Chancellor of the Exchequer on the substance of his Budget but more wholehearted praise on his method of presentation.
I listened with great interest to the Chief Secretary to the Treasury. After he had accused me of nodding agreement, and I had denied it, he said, engagingly, that perhaps he would have been a good auctioneer. I said that he would have made a better auctioneer than Chief Secretary. Whether a good auctioneer or a good Chief Secretary, he has the quality of unshakeable complacency. Policies may come and policies may go, Select Committees may come and Select Committees may go, reports may come and reports may go, but so long as he is a Treasury Minister all is for the best of all possible worlds and every policy is presented with that degree

of self-satisfaction, skilfully presented, which we always associate with the hon. Gentleman.
I am sorry that the Chancellor has left the Chamber. I know that he is having a worrying time at the moment, but I hope he will return soon because I have a few words to say about his policy. I want first to express my personal sympathy with him in having had to face an international monetary crisis in the weekend before his Budget. No ex-Chancellor and few hon. Members could feel other than sympathy for a Chancellor placed in that position. I suspect that I can perhaps appreciate his difficulties even more than his other predecessors in the House because, although I had not the experience of having to leave the country for an international monetary conference, we lived through the first of the recurring dollar crises in the weekend before the Budget in 1968.
I managed to avoid going to Washington. I asked my right hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever) to go in my place—and incidentally, I would add, we all very much miss his absence from these debates and very much look forward to his full recovery. As I was saying, on the Sunday before my 1968 Budget I had to live through a day full of crisis, although I did not have to go abroad, as the present Chancellor did. But I did have one experience which even he has escaped—that of having to make, at 3.30 a.m. not 3.30 p.m., a statement about the closing of the exchange markets, with all the delicacy involved in international monetary statements, to a packed House—a House which perhaps it would be unfair to say was febrile but which had something of the nature of febrility, quite naturally, at that stage of the morning.
However, I am somewhat mystified by the Chancellor's decision to open his Budget on 6th March. That does not mean to say that I think it was his own fault that he ran into an international money crisis by his choice of date. The dates of international monetary crises are not wholly predictable, and no doubt, at the present rate, had the Chancellor chosen to present his Budget on a rather more usual date it could easily still have run up against the next international


monetary crisis, or the one after that, by the time he got to early April.
Nor am I arguing for the traditional hallowed date as near as possible to 5th April. I have become increasingly sceptical whether the great annual occasion of Budget day any longer makes real sense in parliamentary and economic terms. A Chancellor is always very attracted by it, but looking at it from the slightly broader perspective that one can assume from outside office, I think that it is not wholly attractive and that indeed it is somewhat doubtful whether it is the most sensible way of managing our affairs—whether it is not one of those traditions, like the City of London Police Force, which might be regarded with scepticism at the present time.
I am also doubtful whether a four-day Budget debate makes any sense. We had a lot of empty benches last week—I contributed to them myself to some extent by my own absence. I wonder whether, given the present pressures on parliamentary time, it would not be more sensible to have the same amount of debate but more spread out rather than concentrated in the way that is done at the moment. I am not sure that such constriction of debating time is the sensible way for us now to proceed. But as long as the traditions persist, a very early Budget—which 6th March certainly was—signals something very special. It signals that the Chancellor of the Exchequer believes that he has a special message to give the nation which must be given in March rather than at a later date. I did not find anything very special in the Chancellor's speech. Apart from the announcement of the rate of VAT, which could have been done separately, it was a Budget which could have been just as well presented at the normal time, at any other time, or almost not at all.
I turn to the general Budget effect and, in particular, the impact, which is of crucial importance at present, of the public sector deficit on the economy. The Chancellor is normally very jaunty. It is remarkable how jaunty he is in view of the strains he bears. But I thought that he was a good deal less jaunty than usual when he told us that Government borrowing would rise in the year now beginning from the already very high figure of £2,800 million to £4,423 million. This is greater than any figure at any

time in our history, including the war, and a change, if I may remind the right hon. Gentleman in passing, from an overall surplus of £600 million in 1969–70. Therefore, there has been a turnround in four years of £5,000 million in the impact of the public sector requirement on the total of our economic affairs.
That puts the much-vaunted £3,000 million tax remission into perspective. It has been more than paid for by the rise, in the real sense, in Government indebtedness. Let there be no doubt about that. There has been no provident financier, no depositing of sums of money and then distributing them to the public. The Chancellor has done it quite distinctly by increasing the size of the public sector deficit—in that and in no other way.
An increase in public deficit financing might, in certain circumstances, be perfectly desirable and defensible. If not all of us, then at any rate the great majority of us are sufficiently Keynesian to believe that. But in what circumstances? In judging whether the present circumstances are right, it must be said, first, that this treatment of public sector deficit financing—this build-up from minus £600 million to plus £4,400 million—is a most extraordinary performance for a party which spent the whole of its six years in opposition moaning about the size of public expenditure, which at the 1970 General Election pledged itself to reduce it, and which set about doing so in a particularly mean and pettifogging way in its first year of office.
The Chief Secretary said in February 1971,
The Government themselves will maintain a restless search not only for greater cost effectiveness in the public sector but for further reductions in the size of the public sector. That is what we promised the country last June, and that is what we are going to carry out."—[OFFICIAL REPORT, 22nd February 1971: Vol. 812, c. 233.]
As I have said, the Chief Secretary's complacency is totally unshakeable. The Government have done exactly the reverse. Their policies have been restless—so restless that they have been completely without any discernible direction. They have had the restlessness of men led by the falseness of their election prospectus into a political and economic impasse and have since been trying, without any compass of philosophy or belief, to follow any temporary or


deceiving chink of light which seemed to offer them a way out.
I do not think that the Chief Secretary disputes what the Select Committee said about these matters. The Government cut the 1974–75 programme by £950 million, with all the pettifogging decreases—the abolition of the Consumer Council, the stopping of school milk, the imposition of museum admission charges, and a whole range of other things. That was when the Chief Secretary spoke. Of course, there were bigger items than those. They then increased it by £500 million by November 1971. They increased it by a further £1,200 million by the end of 1972. So, having gone down by £900 million—and all these are constant prices, so there is no inflationary effect—they went back up by £1,700 million. The net result was an increase of £750 million on the inherited programme.
Was this violent swing, this oscillation without direction, justified by the need to act against unemployment? Clearly the need for the Government to act against unemployment in 1971 and 1972 was very great. It could be held to have a very high, and perhaps an overwhelming, priority. But there are a number of things to be said here. I understand that the Chief Secretary does not wish to controvert the Select Committee's Report. Only a minute portion of the increase—less than 20 per cent.—was taken up by counter-cyclical measures.
Secondly—and perhaps this is more important—the Government's timing, in relation to unemployment, of their public expenditure changes has been quite appalling. At the very time that they should have been applying the stimulus, they were making the cuts of £900 million.

Mr. Timothy Raison: Why did not the right hon. Gentleman do it?

Mr. Jenkins: I take a certain share of responsibility for this. With the benefit of hindsight, I think that I would have been economically right to have been expansionary in the 1970 Budget. I do not think that I would have been necessarily politically right because the country had been very soured in its opinion about pre-election give-away Budgets by its experience in 1954, 1955 and 1959. But I have no doubt, with the benefit of

hindsight, that economically I should have been somewhat more expansionary.
But, although clearly 1969 was a good year, and the beginning of 1970 and the second half of 1970 were very good from the balance of payments point of view—that was not what hon. Members opposite, and particularly the Prime Minister, were saying at the time of the General Election, but it was true—we had recently emerged from a very difficult tunnel. But I give the hon. Gentleman the point with the greatest pleasure. I should and, with the benefit of hindsight, would have been more expansionary. But that does not begin to excuse the waste of time during which we had endless mini-Budgets as well as the 1971 Budget.
The Chief Secretary's statement, let alone the Chancellor of the Exchequer's mini-Budget and Budget, was made nine months after the election and 11 months after the Budget in 1970. The Government were continuing to go in the wrong direction. With foresight, expansion should have started at an earlier stage, and I could have had something to do with it. But, having persisted in the policy of holding back the economy throughout the whole of the end of 1970, well through into 1971, and allowing it to get into the position in which unplanned and dangerous increases in public expenditure looked as though they were necessary, there was no excuse for panic measures to get out of the difficult position.

Mr. John Mendelson: My right hon. Friend puts heavy emphasis on the phrase "with hindsight". He has repeated it four times in the last two minutes. But he must recall—if he does not a reading in HANSARD of the Budget debate following the Budget for which he was responsible will show—that some of his hon. Friends and others who had far less information than he had, and much less responsibility, said that the Budget was not sufficiently expansionist. He says publicly on various occasions that what is wrong now is that we are not sufficiently attuned to respond to the desires of the electorate. He has given a clear example of not knowing what was going on in the minds of the electorate.

Mr. Dennis Skinner: He is wrong again now. That sums it up.

Mr. Jenkins: I do not recall having then any advice, although no doubt it would have been valuable, from my hon. Friend the Member for Bolsolver (Mr. Skinner). I do not think that we should go too deeply into this matter, but I am willing to argue it with my hon. Friend on this or any other occasion. However, I want to have a bit of an argument with the Chancellor the Exchequer.
It is true that some of my hon. Friends, including, no doubt, my hon. Friend the Member for Penistone (Mr. Mendelson), would have liked a more expansionary Budget in 1970. We could have had one. Quite a lot of my hon. Friends wanted a more expansionary Budget in 1968 and 1969. They would have been absolutely wrong in 1968, and we would have been in an appalling mess if we had had one. A Chancellor of the Exchequer never lacks hon. Friends who urge him to introduce an expansionary Budget. Sometimes they are right, sometimes they are wrong. But the fact that they can be pointed to on a particular occasion is not of unique significance.
I was endeavouring to deal with the mistiming of the Government's stimulus. When they should have been giving it, they were making cuts in public expenditure. The central count against them is that they should never have allowed the economy to get into a position in which we could have a public sector deficit in this past financial year of nearly £3,000 million without a full state of activity—without full employment. Once we have a massive public sector deficit, even well below full employment, almost inevitably it continues through to further years, which may be years of different conditions, producing a highly un-manoeuvrable mass for the direction of the economy. That is what we have now. The deficit is not only to continue through but is to rise from the present very large figure to £4,400 million in the coming financial year.

Mr. Patrick Jenkin: Is the right hon. Gentleman arguing that the public sector deficit for the current year, 1972–73, was too high and that it should have been less? If so, how is that consistent with what he has said about the need to combat unemployment, which he frankly admitted was very serious at this time last year?

Mr. Jenkins: I do not think the hon. Gentleman has understood the point I was endeavouring to make. It must be due to a lack of lucidity on my part, for which I apologise.
I am saying—and this is not a debating point but a point which I hope the House will take seriously—that in the management of the economy one should never get into a position in which the economy is allowed to become so flat and slack, as it did in 1971 and 1972, that we can afford, as in 1972–73, a huge public sector deficit of nearly £3 million without producing anything like full employment. Once in that position we are left with a huge public sector deficit which, without the most swingeing, dramatic and undesirable cuts in public expenditure or increases in taxation, will be with us for several years, possibly in very difficult economic circumstances, and will be gravely disadvantageous in the management of the economy.
I think that either the Chief Secretary or his hon. Friend the Financial Secretary asked my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) in the public expenditure debate, as though it settled the matter, whether the Opposition believe in higher or lower public expenditure. This is not the nub of the argument concerning the public sector deficit.
I believe in a high level of public expenditure. I do not believe in a number of the matters before us at the moment. For example, I do not think that the increase in real terms in defence expenditure is justified by the world situation. Nor, generally, is a great deal of planned spending on roads and motorways. I believe that a number of projects could be done more economically. But as a broad matter of principle I believe that more of our social problems are affecting communities, not merely individuals, and that they can be solved only upon a community basis and therefore they require community spending to deal with them
I am not saying that the present proportion of the national income is too high. I believe that public expenditure should be properly planned. It should not depend on this unwieldy and menacing public sector deficit and it should not be accompanied by the soft options of ill-placed taxation reductions which we cannot afford and have in no way earned.
How does the Chancellor propose to deal with the problem that he has created for us? I want to look at this problem under two heads: first, the problem of financing this public sector deficit and, secondly, the allocation of real resources.
First, let us consider the problem of financing this public expenditure deficit. Last Tuesday the Chancellor, a little defensively, said that the problem of financing the £2,800 million was not too bad last year, because our foreign exchange reserves had been run down by £1,600 million. It was a curious defence, but in a sense I suppose it had a certain validity. Presumably—the Chief Secretary will correct me if he thinks I am wrong—the Chancellor is not proposing to do the same this year. As I understand it, that is not part of the Government's plan.
Even with that plan, that we ran down by £1,600 million our foreign exchange reserves—such a running down does not lead to an increase in the money supply, but the reverse—the money supply rose in the last financial year at a rate which, if repeated, would be incompatible with the Chancellor not strongly stoking up the inflation about which he always complains so much. He said that last year bank lending to the private sector led to the 20 per cent. increase in the money supply. He dealt with the public sector by saying it was due to sales, non-gilt-edged, to the non-bank public, and running down our reserves.
What will happen about private sector borrowing requirements during the corning year? The Chancellor has an extra £1,500 million of public sector deficit to finance. He cannot run down reserves to anything like the same extent that he did last year, and presumably he wants investment to go up at its present miserable level.
The Chancellor's savings concessions, which, as my hon. Friend the Member for Gateshead, West (Mr. Horam) pointed out last week, are grossly egalitarian—there is no question but that they amount to a similar further tilting of the tax advantage towards the better-off—may divert some money from the private to the public sector, but I should guess not nearly enough, and at a cost of unprecedented interest rates upon mortgages, local authorities and the relative profita-

bility of investing money in fixed investment as opposed to using it for purely financial purposes.
The Chancellor has a totally demoralised gilt-edged market, with Consols and War Loan standing at levels well below those which in 1969 aroused shrieks from nearly every hon. Gentleman opposite about the debauchery of Government credit. Incidentally, at a time when he is pushing up interest rates, with all the disadvantages involved, to ration credit, it is ludicrous for the Chancellor to continue with his repeal of my 1969 measure to disallow interest for income and surtax and, as a result of his change last year, himself as Chancellor to pay three-quarters of the charge to those with big incomes. It is near lunacy to be extremely worried about the general money supply and borrowing position and to allow interest rates to go to levels which only a few years ago would have been thought totally unacceptable and at the same time to encourage certain people to borrow by making sure by his own provision that they pay only 25 per cent. of the interest charges themselves.
I turn now to the real resources aspect of the matter. The balance of payments has clearly already gone seriously wrong. I find it impossible to believe—indeed I do not think that the Chancellor believes—that it will not get substantially worse in the course of the next year. This will have to be put right some time, and some time fairly soon, and we should be in no doubt that putting it right will require a heavy switch of resources. Exports, less imports, in the jargon, will have to go up faster than ever in our history to maintain or reachieve a tolerable balance of payments position. This costs resources. So does the increase in fixed investment that the Government must be looking for. Therefore, on a big scale it means an increase in stock building which at this stage of the cycle seems overwhelmingly likely.
Let the Government be in no doubt—I cannot believe that they are in any doubt when they consider these matters coolly—that the present boom is already more dangerously unbalanced than that in 1952–53, that in 1958–59 or that in 1962–63, because it is led by consumpton to a much stronger extent and, even in its early stages, it is pulling in imports to a much stronger extent than in any of these


three previous booms, all of which led to considerable difficulties.
Even if we do not accept all the quantities given in the independent surveys—whether the London and Cambridge or the National Institute, and I certainly agree that nobody can ever be certain about quantities—we cannot escape the logic—I think that the Chancellor will regret having tried so firmly to do so—that a substantially slower growth in personal consumption than in the national output will fairly soon become necessary.
Even if we get the projected growth in national output—which for the time being I believe and am glad to think we shall—it is a total fallacy to believe that this problem of resources in relation to the balance of payments and other competing claims is in any way solved by floating the pound. Floating the pound is probably right. It probably has been right and will continue to be right in certain circumstances, although I attach somewhat greater importance to trying to get a multilateral solution than do perhaps some hon. Members on both sides of the House.
I take that view not primarily because of my European views. I regard the present position as so serious that if I thought it would help I should be happy to put progress on this front into cold storage for some time. I take that view much more because I think that there is a certain tendency to underestimate the fundamental seriousness of the monetary crisis b the world, to underestimate the extent to which the world monetary situation has changed in the last three or four years. The basis of Bretton Woods has gone. The basis of that agreement was the hegemony of the dollar, the extremely powerful position of the dollar. That has gone once and for all, and cannot be recreated. Therefore, in a real sense we do not have a world monetary system. We have a chicken running around with its head cut off. This situation could have grave dangers both for the future of world trade and, because of our dependence upon it, for the future prosperity of this country.
Floating temporarily eases certain difficulties, but by no means all. It does not mean that we can go on allowing the balance of payments deficit to amount. It does mean that as the pound floats

downwards not only does that exacerbate the main problem of internal inflation but also, because of a deterioration in the terms of trade, it increases the strain on the resources involved in getting the balance of payments right and in preventing the float from becoming a steady and unacceptable sink.
In my view, the Chancellor has quite new problems ahead of him. So far he has been a tax change and a tax reduction Chancellor. That, combined with his natural buoyancy and skill, has meant that his personal reputation today is probably higher than many people, including myself, thought it would be when he took over two years and eight months ago. I gladly give the right hon. Gentleman that. But he has never yet had to face the hard problems of demand management, with the difficult and inevitably unpopular choices there involved. In future, the right hon. Gentleman will have to face those problems. I hope that he is girded for them because he will need to be, but in my view there are not many signs in this Budget that he is.
The most characteristic change which he announced was the abolition of the tax upon sweets, ice-cream, lollipops and potato crisps, at a cost of £110 million. I know why the right hon. Gentleman did it. The effect on the retail price index is pretty terrific, and also it gets a fairly easy cheer, but when I think of the social priorities and of the real poverty in this country I conclude that it was a frivolous concession. It would have been far better to increase—

Mr. Will Griffiths: Mr. Will Griffiths (Manchester, Exchange) rose—

Mr. Jenkins: I am coming to the point that my hon. Friend is about to make. I think that he was going to ask what I did. It would have been far better to have increased family allowances with claw-back, which is precisely what we did even at the time of the extremely difficult Budget in 1968. I also think that to persist with the non-aggregation of children's income in present circumstances, while nothing is done about family allowances, is a grave misdirection of effort. In particular, I believe that the Chancellor will regret his decision to make this frivolous concession on potato crisps and ice cream. I believe that he will also regret persisting in giving away


£300 million angled very much towards unearned income.
The Budget is already almost a nonevent. In itself, I make no complaint about that. Dramatic Budgets are not necessarily a sign of the health of the economy, but the economy is not healthy, and the Budget has done nothing to give us confidence for the future. The Government clearly bear an appalling responsibility for the mess. For two years they flexed their provocative muscles. During the same period they committed gross mismanagement, even on their own assumptions. Then they decided that their flexed muscles were not strong enough and, half repentant, half truculent, they have sought some kind of accommodation, but the Chancellor's policies continue, in the same way as his tax policies, like something left over on the morning after an ill-fated party.
But I do not think that we can just rest on the passing of blame. It is too easy for the nation to decline in an atmosphere of mutual recrimination. The controlling of inflation will not be easy or painless. I think that we need to strike a new social balance. I agree with some part, though not all, of what my right hon. Friend the Member for Bristol, South-East (Mr. Benn) said. I think that we need a jerk towards equality. Our economic distribution has got out of line with the social system and I think that the friction there is one of the great causes of the difficulty that we are experiencing.
It is also essential to fill in the hole in the middle of the prices policy and control basic food prices. Unless that is done, the policy will look hollow. I do not agree with my right hon. Friend that we cannot deal with inflation so long as some people are significantly better off than others, or that those who are better off cannot contribute anything to this problem, because the whole of the House of Commons, in varying degrees, is better off than the average of the population, and that should still many voices, including that of my right hon. Friend, my own and nearly everybody that one can see. It may be a good thing, but it is an unorthodox doctrine.
We shall argue for a long time about what balance we want in this country. While we do that, I do not think that we

can be in the position of saying that every price increase or every wage increase, however inflationary it may be, is justified. Until that ultimate social argument is settled we must continue to try to deal with the problem. We cannot wait for the argument to be fought out before inflation is brought under control.
I believe in a prices and incomes policy. I believed in one in Government, and I believe in one in Opposition. It must apply effectively both to prices and to incomes, but we should not be so obsessed by it that every debate is turned into a prices and incomes debate. We should not take the view that a prices and incomes policy is the only thing that matters in the economic field and that when this is right everything else is right.
There is a good deal more to answer for, and I believe that in a Budget debate it is particularly appropriate that we should apply ourselves to some of the issues of economic management with which the Government have failed signally to deal during the last 24 years. This is a transitional Budget for the Chancellor.
So far the Chancellor has been able to be a sort of Lady Bountiful giving away tax concessions—concessions which have been welcome to some people at least—in a happy afternoon atmosphere of a garden fete. The present Budget marks a sort of twilight. It is not yet dark but the shades of evening are falling and the cheers are becoming a little thinner. But in future it will get darker for the right hon. Gentleman. He will have more difficult Budgets to present, and I hope that he will face up to the next one, from the point of view both of economic management and of social justice, better than he has faced up to this one.

6.10 p.m.

Mr. William Clark: We have listened to two remarkable speeches from the Labour benches. The right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) in a thoughtful speech gave us a good deal of information about what happened in the 1970 Budget and told us what foresight—or perhaps it should be hindsight—might have achieved in terms of that Budget. However, the one fact omitted by the right hon. Gentleman was that at the time of the 1970 Budget the then Labour Government did nothing at


all to stop the wage explosion that was beginning at that time. It is from that event that most of our economic troubles have stemmed.
The right hon. Member for Bristol, South-East (Mr. Benn) in a rumbustious speech—the contrast between his speech and that of his right hon. Friend was so marked that I wondered whether I was listening to members of the same party—sought to make an electioneering address which had little to do with the Budget. Indeed he ended up by contradicting himself, and the right hon. Member for Stechford was courageous enough to say that he did not agree with his right hon. Friend.
There are certain aspects of the Budget which must be welcomed by everybody, whether old-age pensioners or those affected by the charity proposals, estate duty alterations or whatever it might be. The underlying thesis of the Budget is the concept of a 5 per cent. growth. My right hon. Friend has taken a calculated risk. If his Budget is to succeed, we must reach this target of a 5 per cent. growth and we must maintain it. Its success depends on whether phase 2 works. Phase 2 depends on the reasonableness of the trade union movement and on whether the trade unions will see the folly of inflationary wage claims, which are pricing us out of world markets and increasing our cost of living. In this respect the Government must do something to deal with the subject of strike pay.
Many of my hon. Friends have drawn attention to the worrying question of the money supply. This subject has been well aired in this debate and I do not intend to add to it, except to remark that I was delighted to hear my right hon. Friend the Chancellor of the Exchequer say that he was paying strict attention to the money supply. There is no point in allowing money supply to increase, because this would only suck in imports and act to the detriment of our exports.
We have heard a lot of Labour dogma about the surtax payers, and Labour Members constantly harp on the £300 million which has been given to the rich. What the Labour Party never admits is that some of those taxpayers are paying 75, 80, 85 or even 90 per cent. rates of tax. Surtax over the past 20 or 30

years has acted as a deterrent, and I am delighted that my right hon. Friend stuck to his guns and went in for a reduction. The tax reductions overall have been of the order of £3,000 million and 10 per cent. of that sum has gone to the top management strata, which is surely not wrong of itself.
Many of my hon. Friends have said that it is wrong to say that the surtax payer next year will be paying less tax. I am sure that the hon. Member for Heywood and Royton (Mr. Joel Barnett) will agree that the tax liability of any person depends on his tax liability in the fiscal year—

Mr. Joel Barnett: indicated dissent.

Mr. Clark: It is no good the hon. Gentleman shaking his head, because the surtax payer in the following year will be worse off than he was in the previous year.

Mr. Martin McLaren: Is it not also the case that taxation rates in the United Kingdom are among the highest in the world?

Mr. Clark: I agree with my hon. Friend and I am grateful that he has drawn attention to that fact. The top rates of tax in this country are certainly the highest in the Western world.
I was pleased that the Chancellor of the Exchequer referred in the way he did to the Select Committee which examined the question of child credits in the taxation system. There has been a great deal of misrepresentation or ignorance about what is happening concerning child credits in the tax credit system. I wish to emphasise that this was left as an open question in the Green Paper, and it was for the Select Committee to come back with a recommendation. However, there has been pressure in the Press and the media to suggest that the Government have already taken the decision about paying child credits to the father. That is completely wrong because no decision has yet been taken. I am grateful to my right hon. Friend for having cleared that ambiguity.
I welcome the save-as-you-earn scheme because it will mean that a person will be able to invest in the company in which


he works. I do not regard this as co-partnership, and under the scheme I presume that one will be able to take out one's money after five or seven years. I should like my right hon. Friend to bear one important point in mind when he seeks to bring forward detailed legislation on this. If a person saves a maximum of £20 a month over seven years, that will give a total investment of £1,680. The shares will be worth a nominal value of £2,400. I should like to know who will pay the 30 per cent. discount. If a company issues shares at 30 per cent. discount, the value of those shares must be 143 to enable the company to receive par value on the shares—unless it is envisaged that the Chancellor will change company law which has operated for many years. If the 30 per cent. is payable by the company, it means that the company will be chargeable to tax—and with corporation tax at 50 per cent. the result will be that the Exchequer is subsidising this form of saving.
I do not object to that for one moment. My arithmetic tells me that there is a 21 per cent. tax remission to all those who join the scheme. If it is right for the scheme to be extended to the people who work in industry and the Exchequer is to give a 21 per cent. tax remission, I do not see the logic of not extending this idea to workers in nationalised industry. There are not many employees in the nationalised industries who would wish to invest in them, because the idea of investing in industry is to get a profit. This will involve local government employees, civil servants and employees in certain private companies in which it is impossible to buy shares. I should like my right hon. Friend to bear these points in mind when formulating detailed legislation with a view to allowing these persons the right to invest in other companies.
There is one omission from the Budget, and the right hon. Member for Stechford, advanced certain strictures on this topic. I, too, slightly regret the fact that £110 million has been given to relieve the cost of crisps, ice-cream and all the rest. I am all for reductions in taxation, but in terms of changes in VAT it is all a question of priorities. I should not regard crisps and ice-cream as being of high priority.
There is one section of the community which has been left out during the last few years. The old-age pensioners have had increases, the workers will be able to invest, but I am worried about the newly-married who are trying to buy houses for the first time. If £110 million was available, it might have been put to better use by helping the newly-married or those purchasing their first house. We could devise a scheme where a second mortgage could be given at advantageous interest rates so as to increase property owning.
A lot has been said about the £4,400 million which is the borrowing requirement. I have never been able to understand why the presentation of our national accounts is so archaic and almost impossible to understand. We have receipts of £27,633 million with expenses of approximately £24,000 million. We have a revenue surplus of £3,223 million and a capital expenditure of £7,700 million, and we are told that £800 million of that is a once-and-for-all exercise because of the swap-over taxation, so our true capital expenditure is £6,930 million. However, it is never clear in the presentation of the accounts how much of that capital expenditure is repayable. If it is not repayable it should appear not under capital expenditure but under revenue expenditure. If it is overseas aid, an overseas loan or grant, or a grant to private industry, we get no return. These categories should be included under revenue expenditure.
I urge my right hon. Friend to sort out what is true capital investment. If a balance sheet shows a surplus of £3,200 million, it is quite acceptable to be able to spend double that one year's profit. But we are not really certain whether we are talking in the same context. I should have thought, given the reforming qualities that my right hon. Friend has shown regarding not only unified tax and tax credits but other matters, that it is high time that we had an independent body to look at the presentation of our annual accounts. It could be done through the procedure of a Royal Commission or in some other way.
Generally I welcome the Budget. My right hon. Friend is taking a risk but one which we are capable of sustaining. Much depends on the success of phase 2.


I am certain that moderation will be shown and that the following year will prove my right hon. Friend to be right.

6.23 p.m.

Mr. John Pardoe: It is a pleasure to follow the hon. Member for Surrey, East (Mr. William Clark) because I serve as a member of the Select Committee of which he is Chairman. I welcome his remarks on credit income tax. The Chancellor of the Exchequer has not spiked the guns of the Committee. I shall not be revealing any secret if I suggest that I cannot imagine that a majority of the Committee would have been able to suggest that the credits should be paid to the husband.
The Budget does not improve on acquaintance. The Chancellor has said that in his view it is a neutral Budget. The Economist has said that it is an irrelevant Budget. I believe that it is an over-cautious Budget. The Chief Secretary said that the decision was taken to go for growth. That was absolutely right. The Chancellor said much the same thing last week and he obtained his headlines. But has the Chancellor gone for growth? The Budget was introduced in a situation in which business confidence was returning after a period of almost total collapse over a great many years. The essential need of the Budget was to bolster that confidence. I fear that the Chancellor is already giving signs that he may yield to the conservative and overcautious voices behind him.
I accept immediately that it is notoriously difficult to make a Budget judgment, but I think that the Budget will mean that we miss the 5 per cent. growth target at which the Chancellor says he is aiming. I fully support him in that aim.

Mr. Bruce-Gardyne: I know it has frequently been said that my right hon. Friend has described himself as aiming at a 5 per cent. rate of growth. However, the hon. Gentleman will search the Budget speech in vain to find any commitment to any such target.

Mr. Pardoe: If that is so, it is a remarkable admission. I shall look forward to the comments from the Government Front Bench if the Government are saying that they are not aiming at a

growth rate of 5 per cent. It sounds as if the hon. Member for South Angus (Mr. Bruce-Gardyne) is trying to offer excuses in advance for failure to perform. It is that failure which I suspect will come about.
I query one aspect of the Chancellor's Budget judgment concerning confidence on the export and import front. I accept the argument put forward by the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) and his grave fears about the balance of payments situation. The Chancellor has calculated that imports will rise over the next 18 months by about 7 per cent. He said that they rose in the last 18 months by about 10 per cent. He said that exports will rise by nearly 7 per cent. as against 3·9 per cent. over the last 18 months. I do not see why he believes that will happen. There was nothing in his Budget speech to indicate how he has found this new confidence in decreasing imports and increasing exports. I doubt whether it will happen. The figures given in table 4 of the Financial Statement and Budget Report show that he believes it will happen over different periods of time. I cannot accept that he is justified in saying that.
If it does not happen, what will the Chancellor do? He may be right and it may happen, but if it does not will he go for a lower rate of growth? Will he accept the sinister advice of some of his hon. Friends and go down to 3½ per cent., 3 per cent. or even less? Does he think that a lower growth target would solve the balance of payments problem?
A great deal of our Budget judgment, and the Chancellor's judgment, must depend on what it is thought will happen at the completion of the international currency negotiations. I am deeply pessimistic. It seems highly likely from what has been said recently, including what the Chancellor has said, that he will accept a non-settlement—namely, a settlement that will not work. The Chancellor and many of his hon. Friends, and certainly I and my hon. Friends, are all Europeans. We do not have to continue proving we are Europeans by our willingness to rush headlong into a European monetary settlement which will not work and which is against the short-term and long-term interests of the British people and the people of Europe.
A European monetary solution must come eventually. I hope that it will come, but it must come as an integral part of a much wider European integration. Tax harmonisation, a proper European regional policy, a European prices and incomes policy and certainly the harmonisation of social security must come before monetary integration. That integration is logically the last step in the process of European harmonisation and not the first step as the Chancellor seems to suggest.
What is the Chancellor's intention? When questioned on this matter some 10 days ago he said:
I did not say that we wished to refix. I said that we intend to refix.—[OFFICIAL REPORT, 12th February, 1973: Vol. 850, c 984.]
I do not believe that the Chancellor needs to distinguish between his wish and his intention. The Chancellor must stick to his guns in these negotiations and stick to the policy of floating. It would be far better if the currencies of the whole world floated. There is no question of our going back to pegging the pound along with the other European currencies.
I come to the question of the Chancellor's record on taxation cuts. The right hon. Gentleman clearly thinks, if the Budget is to be believed, that he has already done a great deal in this respect. I imagine that propaganda has had its effect. A very large number of people in my constituency believe that, if there is one promise that the Government have carried out, it is their promise to reduce taxation. The promise was boldly given in "A Better Tomorrow" under the heading "Lower Taxes", and it said simply:
We will reduce taxation… We will concentrate on making progressive and substantial reductions in income tax and surtax.
This has not happened. In 1969–70, which was the last full financial year of the Labour Government, income taxes amounted to £5,155 million. Yet the Budget papers show that in 1973–74, the fourth year of the Conservative Government, income taxes will amount to £7,593 million. Therefore, in four years the Conservatives have managed to increase revenue—admittedly, not rates—from income taxes by a cool £2,438 million. They have taken £2,438 million

more out of the nation's wage packets than the thieving Socialists ever dared to do. This is an increase of 47 per cent. in income tax revenue in four years.
Moreover, the coverage of income tax will now be higher than it was, certainly a year ago. We have not got the figures for how much higher it will be than when the Conservatives came to power, but I strongly suspect that there are more people paying income tax now than there were when the Labour Government were last in power, and 1 million more people will be paying income tax this year than last year.
The Conservatives also promised to switch the burden of taxes from taxes on income to taxes on consumption. Yet between 1969–70 and 1973–74, while total taxes will have risen by 14·6 per cent., Inland Revenue taxes will have risen by 40 per cent. So it has gone in precisely the opposite direction to that promised.

The Minister of State, Treasury (Mr. John Nott): The hon. Gentleman is indulging in so many inaccuracies that I cannot correct them all. The relevant passage of my right hon. Friend's Budget Statement was the following:
Since we came to office … taxation has been cut from 35 per cent. to 30 per cent."—[OFFICIAL REPORT, 6th March 1973; Vol. 852. c. 240.]
The major cuts in taxation have been on direct taxation.

Mr. Pardoe: I suspected that the hon. Gentleman would quote figures on a percentage of gross product basis. Anyone who uses those figures can prove almost anything. The hon. Gentleman is not right in saying that I am inaccurate in my figures, because they come straight from the Red Books for the years I have quoted. I have no doubt that I can use a slide rule just as well as the hon. Gentleman can. If the lion. Gentleman wants to challenge those figures he can do his own calculations, but I guarantee that they are right. If he says that the figures given in the Red Books are wrong, that is another question. My point is that it is absolute nonsense for the Government to say that they have kept their promise and have decreased taxation. They do not have a very good record in this respect.
A question which is not dealt with in the Budget Statement and which is rarely raised in the House, strangely enough, is the whole question of party political finance. I should like the Chancellor to give some thought to this question. It is very difficult to deal with this matter in Committee. As I understand it, it will not be possible to table an amendment to the Finance Bill to take account of the problem. I attempted to do so last year but it was not found possible to do it.
I should like the Chancellor to give some thought to the reforms which have been introduced now, with the support of the President, for the next presidential election and which will help the American political parties to finance themselves out of tax revenue.

Mr. Bruce-Gardyne: For the benefit of the Liberal Party.

Mr. Pardoe: I remind the hon. Gentleman that it is not for the benefit of the Liberal Party only. The hon. Gentleman would do well to examine his own party's accounts. It is very sad that both major parties are running into substantial deficits. Indeed, in the year to 31st March 1972 the Tory Party's expenditure of £1,250,000 exceeded income by £319,000. In 1971 the Labour Party's expenditure of £672,000 exceeded its income by £101,000. These are substantial annual deficits.
It is entirely wrong that political parties should run into this sort of financial embarrassment, because if they do they become dependent on raising cash from not particularly suitable sources—[Interruption.]—I say to the hon. Member for Bolsover (Mr. Skinner) that I did not say that in any sense as an allegation. "Unsuitable sources" can mean anything under the sun. I am making no allegations.
The Government will want to be judged by whether the Budget is fair. It is certainly the way in which most people throughout the country will wish to judge the Budget. If the Government are to be believed, that is how they would like to be judged.
I have nothing in principle against the unification of income tax and surtax. Indeed, it has been the policy of my party since 1961. However, it is extraordinary

to introduce lower rates of taxes for surtax payers in a year when one is struggling to introduce a prices and incomes policy. Admittedly the Chancellor announced the scheme a year ago. That does not make it any more welcome this year, the year of the Counter-Inflation Bill.
I do not think that in any other respect the Government can be said to have introduced a very fair Budget. They have done nothing to increase family allowances, which could have done more at a stroke than any other measure to attack poverty. Long before we get around to tax credits they could have amalgamated family allowances and the child tax allowances. There are enormous amounts of money involved in the child tax allowances, which could have been made available for higher grants through the Post Office in family allowances. Indeed, I would have extended it to the first child, as is common practice throughout Europe.
On pensions the Government made the announcement. Some people have no doubt been led to believe that this is fairy godmother giving out money yet again. In fact, it is all part of the annual review. They have brought it forward by one month, but there is no reason to thank them for that.
Unfortunately the increase in pensions is not even as rapid as the increase in average industrial earnings. Admittedly it will safeguard the pensioner for a short time against the increase in the cost of living, but it will do nothing to ensure him a share in the country's rising prosperity. Nor have the Government done anything to show that they intend to introduce a minimum earnings guarantee, which would be a major weapon in attacking the problem of poverty.
On the regional front the Government are pouring almost unlimited sums into investment incentives, money which runs directly counter to promises given in the Conservative Party's manifesto, which specifically said that money given to the regions would be linked to employment prospects. Now the Government are issuing money all over the place, irrespective of how many jobs it creates.
The only way in which the Government can solve the problem is to introduce a replacement for the regional employment premium. The best replacement of all,


linked closely to the actual performance —I would put penalties on this—in creating new jobs, would be a regionally varied payroll tax. When the new pension scheme comes in the Chancellor will have this to hand, because the new scheme virtually goes over to a percentage contribution. It will be relatively easy then to do it. It would, even now, be relatively easy to have differential national insurance contributions in the regions. It is that kind of direct labour and employment linked subsidy which alone can solve the problem of unemployment and low incomes in the regions.
This Budget will, in a year's time—if we get that far without another Budget intervening or, indeed, two Budgets—be seen to have followed the wrong strategy, to have gone too slowly and to have been a failure. It is for that reason that I am deeply disappointed by the strategy which is enshrined in the Chancellor's speech.

6.40 p.m.

Mr. Norman Lamont (Kingston-upon-Thames): The right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) began his speech by observing how difficult it must be to prepare one's Budget speech in a week of flying off to international monetary crises. I should like to begin by joining with other hon. Members in congratulating my right hon. Friend the Chancellor not only upon his Budget speech, but also upon presenting to the House the third Budget in which he has managed to reduce taxes yet again.
I am particularly glad that the Chancellor chose to ignore the voices, particularly from the Government side of the House, suggesting that taxes should be raised, because surely it is the great unlearned lesson of British economic policy in recent years that in any period when one is trying to appeal for any sort of wage restraint it is purely counter-productive to raise taxes because that in itself can become an inflationary force.
There were two features of the Budget which I particularly welcomed. The first was the save-as-you-earn scheme to enable employees to buy shares in the companies for which they work. I particularly welcome the chance to turn some trade unionists into good capitalists. I notice that some Labour Members, and Mr. Feather, are rather sceptical about

whether such middle-class habits as equity investment could be carried into the working classes, although I am glad to see that Mr. Clive Jenkins has taken a rather more positive view. I should have thought that in this desire to spread the ownership of companies around our society, we had something on which both Right and Left could have agreed.
The scheme has been criticised because although it provides safeguards during the period of acquisition there are no guarantees after the shares have been acquired. But I should have thought that, given the favourable tax considerations which are being given, this was entirely right and that once the shares had been acquired it was right that the risks of owning those shares should be borne by those who had purchased them. The only feature of the scheme which I found rather strange was that we should have this introduced at a time when the Green Paper outlining the phase 2 proposals had announced that various types of stock option schemes were to be frozen for the moment and that new schemes of this type were not to be introduced. I hope that the Chancellor will be able to confirm that the Government will now be taking a rather less stringent attitude towards such schemes.
The second aspect of the Budget which I particularly favoured was the help for the elderly, the raising of the age exemption limit, which will particularly help some people who are above the poverty line but form a group of people who perhaps feel that they have been a little neglected in recent years. The effective linking of the age exemption allowance to retirement pensions is welcome and overdue. I hope that the Government will adopt a similar attitude towards the earnings rule and the disregards for national insurance benefits. One has the impression that some of those have not been adjusted to take account of inflation. Surely the earnings rule ought to be adjusted just as much as benefits.
The increases in pension at a time when there were voices, not solely on the
Government side of the House, crying out for restraint were increases which most people would regard as generous. Pensions have now kept abreast and ahead of the cost of living and, although not formally linked to national average earnings, have also kept pace with national average earnings. I am glad that the pension


increase is to be financed in such a way that it will not be a burden on the lowest-paid. I dare say that the 40p per week reduction will not lead to a march of the lowest-paid down Whitehall. But certainly it relieves them from the sort of burdens placed upon them by successive Labour administrations. The increases are generous. The reactions of organisations such as Age Concern are not only mean but also do not, I believe, represent the views of the elderly generally. One might add that in so far as the pension level is still not high enough, it must reflect the low level of the pension when the present Conservative Government came to office.
Moving on swiftly to the international monetary scene and the remarks made by the Chancellor in his speech on a European approach to international monetary problems, I had intended to urge the Chancellor not to participate in a joint European float. In view of this morning's announcement, I hope I may now regard my need to make such remarks as superfluous. I do not believe that a joint float is likely to be a good solution to either the monetary problems of Europe or to our own problems. That does not mean that Europe should not act together on issues of international monetary reform. We must act together and use our bargaining power together, otherwise Japan will not liberalise its trade and we shall be unable to persuade America to do anything at all. But acting together and a joint float are not the same thing.
There are considerable disadvantages for the United Kingdom in a joint float. It would result in sterling floating upwards with an adverse affect on our balance of payments at a time when we are particularly concerned about it. When a higher proportion of our trade is with the United States than is the case with France or Germany, the joint float against the dollar would act particularly to our disadvantage. I doubt also whether a joint float could be practicable, except on the terms that might be offered by a philanthropist. As the Chancellor asked for the sort of terms that could be given only by a philanthropist, it is not surprising that he was denied them.
When we talk about a joint float, we are talking not just about the pooling of reserves but also about maintaining narrower margins between the European currencies. While such an approach might last while all the European currencies are tending to float in any one direction, once one begins to get a divergence of movement between those currencies the position will be no more maintainable than the snake-in-the-tunnel experiment we had previously.
The third reason why a joint float is the wrong approach to monetary policy was the reason advanced by the hon. Member for Cornwall, North (Mr. Pardoe)—that is, that the harmonising of exchange rates is the last rather than the first thing about which one ought to think if one is concerned to develop a European monetary policy. We are in danger, in trying to harmonise European exchange rates, of attaching the sort of symbolic prestige to them, mistakenly, that people used to attach to particular levels of parities, when Governments refused to change them. We must not fall into the mistake of attaching the same sort of prestige to the harmonisation of parities on a European basis.
It is easy to see the attractions of a joint float to the Germans. It spreads the flow of hot money between several currencies. It lets the Germans off the hook on which they are impailed by Herr Schmidt's determination that his policies shall be distinctly different from those of his predecessor. Herr Schmidt's predecessor would not have allowed so much time to elapse before doing the obvious thing of letting the mark float upwards.
The Chancellor is to be congratulated on allowing sterling to continue to float. He indicated in his speech that there are so many uncertainties ahead of the British economy at present that it is difficult to imagine a time when it could be more difficult to decide at what particular level sterling should be repegged. Anything decided now is likely to be the wrong rate in six months' time. It is not even as though the record of the Bank of England or any other central bank has been a particularly good one in deciding rates at which parities ought to be fixed. I can think of no occasion on which the so-called speculators have been wrong and the central bankers have been right.


On each occasion the market has been right, and we ought to let the market make its own judgment again.

Mr. Bruce-Gardyne: If the market has been right on every occasion, the speculators were in a perfect position to be self-justificatory on every occasion, were they not?

Mr. Lamont: That is just another why we should not give the speculators a one-way option, and I agree with my hon. Friend to that extent.
I turn now to the domestic side of the Chancellor's speech. The verdict of the Press and the commentators has been that he has been taking risks in his Budget. There is no harm in that, provided one knows what the risks are and provided one does not put oneself into a situation in which, if events do not turn out as expected, one cannot change course. Let us examine what the risks are.
The first risk is supposed to be that the economy may be growing faster than the underlying rate of capacity is growing. It is generally assumed that, when talking about growth of capacity, the Treasury is thinking in terms of a rate of about 3 per cent. to 3½ per cent. To some extent there will be a movement away from consumer spending this year towards investment expenditure. There has been a shortage of capacity in certain industries feeding consumer expenditure, and there is not expected to be the same shortage of capacity in the industries which will feed investment demand—for example in the engineering industry, which is believed to have a large amount of capacity. To that extent, therefore, the Chancellor will probably be justified.
But the important question to ask is not whether growth this year will outstrip capacity but whether it will outstrip it next year. Any action to change course has a time lag. Anything we do now will not have an effect for nine months, and anything we do in six months' time will not have an effect for another nine months after that. This is the nature of the risk which is being taken.
The second risk is on the balance of payments—or, rather, the risk that there may be a further rate of depreciation in sterling which could add to the rate of inflation. At present, sterling is buoyed

up because the relative attractiveness of high interest rates in the United Kingdom outweighs the fear of a depreciation in sterling. But that is a highly precarious situation, which could alter at any moment with a movement in world interest rates. No one can doubt, therefore, if anyone ever did, that floating will not he an easy option, and no one can doubt that it will remain necessary to place great emphasis upon the success of phase two.
Some people have been surprised that the Chancellor predicted that the rate of increase in imports would slow down this year from 11 per cent. per annum to 7 per cent. But, here again, I think that this forecast rather than forecasts such as that put forward by the London and Cambridge Bulletin is likely to prove right, in view of the swing from the consumer industries to the investment industries where there is a certain amount of spare capacity.
Having absolved the Chancellor on those two risks, I turn to the third, namely, the question of the level of public spending and of the net borrowing requirement. We are all Keynesians today but, as the economic editor of The Times remarked the other day, this is "liberation with a vengeance". The Chancellor—he was backed today by the Chief Secretary—implied that the rate of growth in public spending would he no greater than that of the gross national product in the next few years. All one can say is that that is not the view taken by many commentators. One hopes that the Chancellor's assurances will apply and that, if the rate of growth exceeds that of the GNP, he will not hesitate to cut back public spending. Apart from any philosophical objections which we on this side might have to increasing public sector spending, there are other fears about public spending.
There is the argument put forward in the Wynne Godley memorandum about the squeeze in consumption which can come from too fast an increase in public spending. There is the fear that the deficit can be financed only by recourse to the banking system. Moreover, this year the background to the financing of public debt will be very different from the background last year. Last year part of the deficit was financed out of the reserves, and last year there was no great


need from the corporate sector to issue bonds.
The Chancellor has announced four methods to try to insulate Government debt from the banking system. No doubt they will have some attractions to investors, but the question is not whether they will be attractive to investors but whether they will attract money which is at present outside the gilt-edged market, or whether there will simply be a switch within the gilt-edged market to the new types of debt. I have no doubt that the 3 per cent, loan issued at 75 will be attractive to high surtax payers—[HON. MEMBERS: "Hear, hear".]—but this is merely a matter of £400 million, and it does not take us very far forward in financing the public sector deficit.
The long-dated convertible stock, I suggest, is unlikely to attract funds from outside the gift-edged market. The 9·6 per cent. redemption yield is not so different from the sort of rates which are available at the moment, and it is in fact below the rates which can be obtained on various deposits of differing lengths of time.
I have some doubts, therefore, about whether these new stocks and methods of insulating public finance from the banking sector will be entirely successful, and I hope that we shall have from the Treasury some indication of the sort of rate of increase in money supply which it expects in the next year. I thought it remarkable that we had no such guideline.
Overall, I am glad that the Chancellor remains committed to growth. I quite see why the Opposition should suggest that perhaps a more cautious policy should be pursued, since their leadership when in office managed uniquely to combine the principles of Ramsay MacDonald with the glamour of Attlee.
The Chancellor is taking risks. He has been open about it. In my view he is justified in taking them. I am particularly glad that he has not gone back on the tax cuts which he announced last year, because growth is not, as we sometimes imagine in this House, something which can be stimulated simply by demand management. Growth is related, as we should now be particularly aware, to the underlying rate of growth of capacity, and in the long run it is the quality of management and the exploita-

tion of resources, such as those available to us in the North Sea, which, far more than demand management, will add to our rate of growth. We must maintain incentives which will stimulate enterprise and new management techniques in industry if we are to have not just a lurch but a real change of gear in the British economy.

6.58 p.m.

Mr. Giles Radice: I am sure that the hon. Member for Kingston-upon-Thames (Mr. Norman Lamont) will understand if, in this my maiden speech, I do not take up all the arguments which he so lucidly advanced. I realise that it is not usual for a new Member to speak so soon after his arrival here, and I only hope that the House will feel that the freshness of my contact with the electorate is some compensation for my lack of parliamentary skill and experience.
I am proud to be the new Member of Parliament for Chester-le-Street, the constituency with the longest record of Labour representation in the country. The names and reputations of my three predecessors are well known to the House. Jack Lawson was a Minister in the Attlee Administration, much revered in the North East and in the House for his fairness and good judgment. Pat Bartley had already begun to make a reputation before his all-too-early death. My immediate predecessor, Norman Pentland, was much loved in his constituency and deeply respected on both sides of the House for his integrity, his courage and his common sense. [HON. MEMBERS: "Hear, hear."] All three were miners, and all three had that sense of justice, loyalty and duty so characteristic of miners. Individually and collectively they have set a high standard of representation, which I shall do my best to maintain.
Chester-le-Street, as the media so often told us during the by-election campaign, is a constituency no longer dominated by the mining industry. In the 1940s there were probably 40 pits open. Now there are only five. But if most people now work in the factories at Birtley and Washington New Town, the sense of community which is a feature and characteristic of Durham mining villages is still very strong. There is an extraordinary number of community institutions and organisations. I hesitate to invite hon.


Members to all 40 of the working men's clubs in my constituency, particularly in one evening, but they certainly are great social institutions. The respect and concern shown for old people is also something of which we can be proud in my constituency, as is the very large number of men and women who are organised in trade unions.
I thought it might be of use to the House if I were to outline the view of my constituents on some of the major issues which have been discussed during this Budget debate. In two surveys before the by-election campaign began, we asked what they considered to be the most important issues facing them and they said "Prices, pensions and jobs". It is about these that I wish briefly to speak.
To begin with jobs, unemployment in my constituency is nearly twice the national average, and the position on job opportunities is far worse. Of course, this is not a new situation. The decline of our old heavy industries has faced us for many years with the old Alice-in-Wonderland problem of having to run very hard to stand still. During the life of the last Labour administration a whole new package of measures had begun to make some impact; and I am bound to say—even in a maiden speech—that the changes in regional policy introduced by the present Government, combined with a very high level of unemployment, have created a climate of uncertainty from which we are only just beginning to recover.
What people in Chester-le-Street and the North-East generally are asking for is, first, a continuance of existing jobs and, secondly, the provision of more new and varied employment. To satisfy their needs we must have determined and consistent Government intervention over many years. We are grateful for the Government's new attitude towards the coal industry, but we are concerned that the Government have not changed their decision to phase out the regional employment premium, one of the most effective instruments of regional policy yet devised, and that there are no new measures such as, for example, a State holding company which might provide us with greater job opportunities which we require. Therefore I join with other hon. Members, par-

ticularly on this side of the House, in the fight for more jobs for the North.
I turn to pensions. In Chester-le-Street there are many old-age pensioners, and many of them live on the poverty line. If it were not for action by local authorities and clubs for the over-60s, the majority would be in dire straits. Old-age pensioners everywhere will welcome the increases in the Budget, announced for October, but nobody would claim that these increases match up to the need. There will, indeed, be deep disappointment that the Government have refused to make cheap television licences available to all. The truth is—and this is a situation for which we all share some responsibility—that we do not give our old-age pensioners the standard of living which they deserve as of right.
Lastly I turn to prices. My constituents feel, with some justice, that the exceptionally sharp rise in the cost of living over the last three years, particularly in food, rent, and rates, has hit them especially hard. I have mentioned already the large number of pensioners and the high level of unemployment as special factors. But there is also the point that earnings in the North-East are £2 to £3 below the national average. Therefore, it is little wonder that the prices issue was the one most frequently mentioned on the doorstep and that housewives everywhere should have insisted on the need for control over food prices. I am afraid they will get little comfort from this Budget.
It is true that certain items of manufactured food, in the jargon of the tax specialists, are to be zero-rated, for VAT, but there is no hint of any kind of policy for controlling the main items of food by subsidy, even as a temporary measure; and, in my view and the view of my hon. Friends, we must have this kind of food subsidy if we are to control food prices.
The chief impression that I carry to the House from the by-election at Chester-le-Street is the dissatisfaction of a large majority of people. In my view, and with great respect to the hon. Member for Cornwall, North (Mr. Pardoe), there is no general belief in the need for a centre party or for a strong Liberal Party. What is present is a desire that the Government should tackle the major problems, some of which I have mentioned,


with determination and fairness. Judging by the result of the Chester-le-Street by-election, the Government have not yet succeeded in convincing my constituents at least that they are fair. On the contrary, many feel that this country is more deeply divided than it has been at any time since the 1930s. No body of opinion feels this more keenly than trade unionists.
Declaring my interest as someone who has worked for the General and Municipal Workers Union for eight years and who is now a sponsored Member of Parliament of that union, something very startling must have happened to turn what was formerly considered to be a very responsible and moderate union—some people thought too responsible and too moderate—into one of the leaders of the rebellion against the prices and incomes policy. One should also remember that this union is still committed in principle to a prices and incomes policy.
The Government would do well to learn from this experience, amongst others, and reconsider their policies towards the trade unions before it is too late. Certainly the issue of fairness and what people consider to be just is one that any Government ignore at their peril. Indeed, it could well decide the next election. It is only within the context of fairness and social justice that the problems which today seem so intractable, and some of which we have discussed in this debate, have any chance of being solved.
I thank the House for its courtesy and consideration.

Several Hon. Members: Several Hon. Members rose—

Mr. Deputy Speaker (Miss Harvie Anderson): If I judge correctly, I believe that it will be possible for all hon. Members who are seeking to catch the eye of the Chair to speak, provided that no hon. Member from now on exceeds 12 minutes—and hon. Members perhaps follow the example which we have just had.

7.7 p.m.

Mr. J. Bruce-Gardyne: It is indeed a privilege and a pleasure to be able to congratulate the hon. Member for Chester-le-Street (Mr. Radice) on his maiden speech. I think that many of us found it hard to believe that it

was a maiden speech. I say that because of the remarkable fluency and clarity with which he presented his arguments.
I believe that the hon. Gentleman and I happened to share, in the rather more distant past so far as I am concerned, a common educational experience. There are one or two others of his hon. Friends who share that common educational experience, and I sometimes wonder whether the influence of that educational institution was entirely desirable as demonstrated by the activities of the Labour Party. However, I am quite sure, having heard the hon. Gentleman's maiden speech this afternoon, that in his case there will be a substantial contribution to come, and we shall look forward to hearing from him on many occasions in the future when he can speak again to us, as he did today, with great sincerity and obviously considerable knowledge already about the constituency which he has been called to represent.
The hon. Gentleman made two observations with which I have some sympathy. He referred to the REP, and I have some sympathy with his doubts about the wisdom of withdrawing it. He also referred to what he regards as the need for food subsidies. I do not altogether share his view about the wisdom of that course of action but it is not impossible that before many months are out his expectation in that respect will be fulfilled.
You have urged, Mr. Deputy Speaker, that we should limit our eloquence and I shall do my best to follow that advice. But I must briefly comment first on the speech of my hon. Friend the Chief Secretary as I think I am the first member of the Expenditure Committee General Sub-Committee called to speak in this debate. I would not claim to answer the strictures that my hon. Friend passed on our report, but perhaps I could comment upon them. He made two points with which I was not entirely happy. He argued that nobody would dispute the realism of the growth forecasts contained in Table 1.2 of the Public Expenditure White Paper. I would comment only that at no time in our history have we achieved a rate of growth of 3½ per cent. over a consistent five-year period, let alone a rate of growth of 5 per cent. I do not know whether these forecasts are realistic but they are not based on past experience.
The Chief Secretary seemed to be deeply hurt by our dubiety about the effects of growth on public expenditure of resources for the next two years. It seemed to me that his argument was like that of a gentleman caught in an act of adultery who says, "I dare you to accuse me of adultery. I have made it clear that I am not saying whether I have been committing adultery or not and in these circumstances it is improper for you to make the accusation against me." I do not think a court of law would normally regard that as a convincing defence. Therefore I am prepared to stand by the report we made and I do not think that my hon. Friend entirely disposed of it this afternoon.
Briefly I should like to express the hope that my right hon. Friend the Chancellor will have something to say in summing up about the outcome of the latest denouement in that "mousetrap" of the economic stage, an international financial crisis. My hon. Friend the Member for Kingston-upon-Thames (Mr. Norman Lamont) expressed a fashionable view about the undesirability of our participation in a joint float. I hope my right hon. Friend, in his summing up tonight, will be able to dispel my suspicion or anxiety that we were unable or unwilling to participate in a joint float basically because we were, in the interests of appeasement, prepared to look forward to rates of domestic inflation in the months ahead which our partners within the Community regarded as socially wholly irresponsible. I hope we shall have that anxiety cleared up.
There were many aspects of the Budget which I liked. I was particularly delighted that my right hon. Friend resisted the urgings of the Labour Party to ensure that land and house prices were increased by the reimposition of the betterment levy, and he was also very wise to look carefully at the advice of the Public Accounts Committee on the subject of taxation and North Sea oil. That Committee seems to have shown precious little consideration for the external implications of taxing North Sea oil, bearing in mind that we shall continue to require to draw 50 per cent. of our oil in the future from the Middle East.
I confess that I am a little less happy about the decision to hand out £110

million to the teenagers through the sweets and candy-floss concession. If that money is available for distribution this year I would have thought that it would be better employed in the form of the concession which my right hon. Friend had let us to hope he would be able to grant to the large unquoted companies which will be very hard hit by the new system of imputation tax.
My right hon. Friend told us that in his judgment the Budget was neutral. That depends on one's calculation of neutrality. I would say that to distribute the proceeds of fiscal drag to the teenagers and the pensioners—and both are likely to spend it—when part at least of that taxation drawn in by fiscal drag must have come from income which would otherwise have been saved, hardly suggests a neutral overall result.
I do not think that this is a Budget which the Treasury establishment would have chosen this year. As my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) pointed out, the natural courses, given the present condition of the economy, were ruled out by the prices and incomes policy. The real spiritual guides of this year's Budget were those two vestal virgins at the shrine of the prices and incomes policy, Mr. William Armstrong and Lord Rothschild.
Occasionally Treasury touches peeped through. My right hon. Friend's speech was all the more welcome for that. I interrupted the hon. Member for Cornwall. North (Mr. Pardoe) when he suggested that my right hon. Friend had committed himself to a 5 per cent. rate of growth. In fact the Chancellor was careful not to commit himself to any specific figure and I welcome that fact very much. I hope that he is not in any sense countermanded by the answer given by my hon. Friend the Minister of State to the hon. Member for Lanarkshire. North (Mr. John Smith) last Thursday in a Written Answer when he described the Government's objective as a 5 per cent. growth rate in the 18 months to the summer of 1974. The caution of the Chancellor was perhaps to be preferred in this respect.
I was also delighted to see my right hon. Friend say in col. 250 on 6th March that preparations were in hand for future reductions in public expenditure, as I have a feeling that they may be needed.


We are still left, as several of my hon. Friends have pointed out, with the daunting problem of an enormous and quite unprecedented Budget deficit for the year ahead. I hope that my right hon. Friend is successful in mopping up some of this extra liquidity which will be collected with his extremely ingenious savings schemes, although I cannot help feeling that perhaps the Inland Revenue deposits scheme might be designed rather to diverting liquidity from the M3 statistics than to getting rid of the liquidity, just as the United Nations seeks not to divert trade from Rhodesia but to divert the statistics of trade with Rhodesia from published sources.
It seems that the prospect for the year ahead is of something approaching an interest rates war, and I hope very much that under the pressure of that situation we do not revert to the abandonment of "Competition and Credit Control." I must admit that I would not take many bets on that, notwithstanding the brave statement of the Chief Secretary last week.
I hope that, in summing up, the Chancellor will feel able to say a little more about precisely what are his objectives for monetary policy in the year ahead. Apart from the statement that
the objective must be to prevent this large borrowing requirement from leading to too rapid a growth of money supply.
and the statement that
It would be quite unacceptable to rely to any substantial extent on borrowing from the banking sector."—[OFKIAL REPORT, 6th March 1973; Vol. 852, c. 252 and 254.]
my right hon. Friend did not say anything specific about the objective of monetary policy. I hope that he will be able to enlighten us further tonight.
My hon. Friend the Member for Cirencester and Tewksbury suggested that maybe we would hear from the Chancellor again before the summer is out, and I confess that I would not rule out that possibility. I hope that if we are to hear from my right hon. Friend again we shall not, in a panic over the rate of growth in the money supply and the development of inflation, which may be quite horrific by the summer, try to revert to the sort of course pursued by the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) in 1969–70, when he

ratcheted the rate of growth in the money supply back to less than the growth of productive potential, and thereby plunged us into the unemployment crisis that we had in 1971. That was entirely the reason. We must learn to stop trying to treat the economy as if it were a yo-yo on the end of a string to be jerked in one direction and then in the other. I hope that we shall accept that very high rates of inflation cannot be cured very rapidly, although the sooner we can make a start the better.
The hope must be that Sir William Armstrong, Lord Rothschild and their friends are correct and that it is possible, in defiance of experience and logic, to control inflation exclusively by passing laws against it. I hope and pray that they are right. If they are not, we may be in for rather awkward times ahead.

7.20 p.m.

Mr. Douglas Jay: Whatever Sir William Armstrong and Lord Rothschild may or may not have said, as the next Opposition speaker after my hon. Friend the Member for Chester-le-Street (Mr. Radice), I join in congratulating him on an exceptionally fluent and relevant speech.
It is extraordinary that the Government should be sailing straight into a large and obvious balance-of-payments deficit without, apparently, any idea of what they will do when the crisis arrives later in the year. The only thing on which I can congratulate the Chancellor is that he has apparently not committed us to the final folly of agreeing to a fixed exchange rate for the pound vis-à-vis all the EEC currencies—at least, so we are told by the Press. I hope that there will be a statement by the Chancellor before the end of the debate about what he has agreed on this crucial issue.
Nothing Ministers have said in the debate so far has altered my view that from a national point of view this is one of the most risky Budgets for many years. The Secretary of State for Trade and Industry was so afraid of referring to the balance of trade that he did not mention imports once in the whole of his speech. I suppose he dared not do so.
The Chancellor was nothing short of frivolous in his one reference to the balance of payments, when he said that the surplus on invisibles would


offset much of the visible trade deficit which is likely to persist through the year."—[OFFICIAL REPORT, 6th March 1973; Vol. 852, c. 246.]
As a way of saying that we face a current balance-of-payments deficit of £700 million or £800 million, that must be one of the most disingenuous and flippant statements ever made by a Chancellor in a Budget speech.
Some of us in recent debates have been accused of over-pessimism because we have argued that EEC membership on the terms we have now accepted would mean rapidly rising food prices and a growing payments deficit. The chickens are all coming home to roost remarkably fast. With our net budget payment to the EEC funds running this year at roughly only a quarter of what it will be in four years' time, and with most food prices still due to rise a long way, we are already running a payments deficit of over £500 million a year. How are these growing future burdens to be met? Instead of answering that question, the Chancellor and the Chief Secretary seem to think it enough to keep repeating that they have reduced taxation by £3,000 million and that growth is running at 5 per cent. a year. But while allegedly cutting taxes by £3,000 million, the Chancellor simultaneously raised the insurance contribution, which is in essence a form of tax, by about £2,000 million according to my figures. To that extent he has switched, not reduced, taxation.
As to growth, the past year has at least shown that demand management by the Budget works in practice, and fairly quickly. But it is always possible to get 5 per cent. growth for 18 months at any time if we start with 4 per cent. unemployment and totally ignore the balance of payments. The trouble is that it is possible to have sustainable growth only if two conditions are satisfied. One is that we are free to manage the exchange rate and the second is that we have an effective prices and incomes policy. But the present Government are perpetually on the brink of endangering the first, exchange freedom, by the reckless pledges to the EEC on fixing exchange rates and on monetary union. I agree that they have so far drawn back—I hope—but we never quite know what they will promise next.
Secondly, the Government are wrecking the chances of an agreed incomes policy by their dear food decisions of recent months. I believe in a prices and incomes policy. The abolition of the Prices and Incomes Board was one of the Government's greatest follies, even in the now-forgotten age of Selsdon man. But I do not believe that anyone can be expected to accept incomes control while the Government pursue their present dear food policy. It is no accident that the most successful incomes policy since the war, in the period 1948–50, was at a time of rigorous price control and generous food subsidies.
There have been world grain shortages in the past year, though the much-advertised 1972 Soviet wheat crop, which is supposed to be responsible for all our difficulties, was only 10 per cent. below the normal figure. These temporary difficulties in the world food market would surely be a reason for any rational Government to avoid other actions which would make the price rise still worse. But the Government, by accepting the common agricultural policy and rushing to enforce it, have made the price rise worse and are ensuring that it will not be reversed when world grain prices fall again.
Indeed, the Government are engaged in raising British food prices
towards Community price levels over a five year period.
That is not my statement but a statement by the Minister of Agriculture, Fisheries and Food as recently as 21st February. I challenged him whether that was what he said, and he candidly repeated it, saying that:
in all the discussions we have had, in the House and elsewhere about the accession, it was always made clear that we should raise our prices to Community levels."—[OFFICIAL REPORT, 21st February 1973; Vol. 851, c. 478–479.]
Some of the ways in which the Government are actively doing that are equally obvious. For instance, they have introduced an import duty on mutton and lamb imported from outside the EEC which is designed to rise in stages to 20 per cent. That is one cause of the rise in meat prices, which has now reached 30 per cent. to 50 per cent. for mutton and lamb since the Government came to power and 50 per cent. to 65 per cent.


for beef. The lamb duty induced the New Zealand Government to divert supplies from the United Kingdom by a quota scheme, and that has intensified the shortages here. Now New Zealand has temporarily agreed to suspend that scheme, but the United Kingdom Government have not withdrawn the tariff on mutton and lamb which gave rise to it.
If the Government maintain that they are in no way responsible by their policies for the present rise in food prices, let them at least withdraw that unnecessary duty. As long as utterly indefensible food taxes like that remain in force, I do not see why anyone should co-operate in an incomes policy.
Secondly, the Minister of Agriculture, Fisheries and Food told us on 24th January that he had agreed with the EEC authorities to abolish what he called the bacon stabiliser on 1st June. Do Ministers deny that? Do they deny that the price of bacon will rise as a result, after 1st June, because of the Government's decision? The same Minister also agreed in Brussels in January to abolish what he called the special arrangement for subsidising the price of sugar in the United Kingdom. This operates as from 1st July. After that the price of sugar will rise further. Unless the Government rescind those decisions I see no reason why unions or anyone else should co-operate in an incomes policy.
Thirdly, the Government have set up an Intervention Board whose sole purpose is to prevent falls in the price of food, if necessary by deliberately making it unfit for human consumption, as the Minister of Agriculture had to admit the other night in the House. The Minister of State for Agriculture, Fisheries and Food explained on 7th March that this intervention system applies to beef. However unlikely, he said, it is that the price of beef may fall too fast in the immediate future:
an assurance against market collapse is essential".—[OFFICIAL REPORT, 7th March 1973; Vol. 852, c. 154.]
I am sure that it will be most comforting to housewives to know that the Government have provided an assurance against a collapse in the price of beef. No wonder the Government's special committee of investigation set up to inquire into beef prices at Christmas con-

cluded that in the long term EEC entry is likely to sustain prices. It said,
In the long term we predict that there will not be a reduction to the beef price levels which were current before the summer of 1972.
With these policies now in force I would have thought that any prudent Government would be preparing for balance of payments difficulties later this year.
Above all we must retain our exchange rate freedom. One curious fallacy which seems to be prevalent at the moment in monetary discussions is that the need for changes in exchange rates is purely temporary and that one day quite soon we shall all be able to retain fixed parities and live happily ever after. This is pure nonsense. This is precisely why I believe —although this is not the time to discuss it—that some managed floating system is the only proposition which offers a permanent solution. The common agricultural policy has imposed a new and gratuitous burden on the United Kingdom. We cannot now devalue in an emergency without food prices rising—except in the short term—still further proportionate to the devaluation. That means that we have thrown away the advantage which this country had and which largely solved our balance of payments problem in 1931, 1949, and 1967.
There is no remedy for this that I can see unless the common agricultural policy is either wholly repudiated or at least drastically reformed. The trouble about the common agricultural policy is that it assumes that exchange rates never change. In the modern world that is a practical impossibility. I ask therefore whether the Government now propose drastic reforms in the CAP in the international trade negotiations under GATT due to start this autumn.
Presumably the Government still have some power of thought and some initiative in this matter. These negotiations are far more important as a worldwide opportunity than any unworkable schemes for achieving a European monetary union. I find it extraordinary that the Secretary of State for Trade and Industry in his speech last week made no reference to these prospective worldwide trade negotiations.
President Nixon's special envoy, Mr. Petersen, visited London and other European capitals in February to find out what


response might be expected to Mr. Eberle's initiative towards freer world trade in his speech at Geneva on 10th November last. Surely we should be warmly welcoming this United States initiative. According to my information, Mr. Petersen went home deeply disappointed with a bleak and negative reply from this country and with no assurance that we shall propose any major reforms in the CAP in these forthcoming negotiations. If that is true, it is a disastrous failure by the Government.
Very soon, possibly this month, President Nixon is recommending a new trade Bill to Congress to give him the power to negotiate next autumn and winter. Our national interests here coincide almost exactly, particularly on the CAP, with those of the United States. A negative attitude by the United Kingdom now may well push American policy, hanging in the balance at present, into protectionism or, even worse, into isolationism. A positive attitude could launch a new step for freer world trade which could be as decisive as the Kennedy Round. For the sake of that opportunity as well as for the vital interests of the United Kingdom, I urge the Government first to preserve our exchange freedom in spite of all the pressure that might be put on us this year and, secondly, to propose sweeping reforms in the CAP and to let the United States know that we mean to do so.

7.36 p.m.

Mr. Ian Lloyd (Portsmouth, Lang-stone): I will not be tempted to follow the right hon. Member for Battersea, North (Mr. Jay) too closely in this interesting question of food prices except to say that while I am sure he would agree that there are a series of substructure policies which account for the real cost of food in the United Kingdom, this depends to some extent on what we decide to produce here, what we decide to import and from where we decide to import it. There is nothing which right hon. Members on either side of the House or any Government can do to affect the real cost of food to this country.
What we can do by fiscal and distributory devices is to ensure that we pay more for it in some way or less in another way, by taxing ourselves more

heavily in some directions and less heavily in others. In that way we can affect the internal costs of food. It is most unfortunate that hon. and right hon. Members tend to give the impression that we can act on the real cost of food to the United Kingdom as a whole. This is not an economic possibility. It is nonsense.
I turn now to the speech of the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins), because one of the most fascinating spectacles in this House is the sight of the great panjandrums of the Treasury Bench fencing with each other at subsequent stages in their Treasury Bench careers. My right hon. Friends I suppose wield the nets and trident of current information and foresight while the right hon. Member for Stechford wields the spear—and it is an attractive one to most hon. and right hon. Members—of hindsight. When this is done the debate tends to be somewhat uneven.
I refer to this point of the large increase in the borrowing requirement. The right hon. Gentleman said that the net turn-round was something like £5,000 million. I do not think that that figure is in dispute. There is surely a constant and unrelenting pressure to increase public expenditure of all kinds. This is affecting all Governments at all times. Whereas he was possibly right in attacking the policy of my right hon. Friend for tending to give reliefs of a trivial nature, if my right hon. Friend had sought to attack the fundamental and sensitive area of public expenditure this would inevitably have produced a most violent political cacophony from the base drums such as the right hon. Member for Stechford, the flutes, such as the hon. Member for Heywood and Royton (Mr. Joel Barnett), and possibly from the triangles such as the hon. Member for Bolsover (Mr. Skinner), who plays his triangle frequently.
There is little doubt that the success of the Budget will be judged entirely by its contribution to the problem of inflation. The picture may be superbly painted, the subject may be interesting, but it hangs in the frame of inflation. As I am sure the Chief Secretary knows, it is a gilt frame and it is most certainly not at the moment a gilt-edged frame.
The question worth asking is whether this is a neutral Budget. In this context, I find the statement that it is neutral quite astonishing. What are the facts? Imported goods are rising in price, in some cases dramatically; foods of all kinds are also rising in price—a worldwide phenomenon not confined to us; interest rates are rising at an unprecedented rate and are reaching unprecedented levels. Most forms of what are called "stores of value"—things which people buy at times of inflationary pressure—are also rising in price—indeed by 40 and 50 per cent. The rise in wages demands is enormous, and this lies much behind our discussion of prices and incomes policy. There are unprecedented levels of public expenditure and money supply.
We exist at a time of undoubted international monetary crisis, the direct consequence of the speculative opportunities created by differences in the rate of inflation of national currencies. Everything in the country is growing at a 10 per cent. compound rate except economic growth itself, which is between 3 and 5 per cent. at best and is all we have to play with.
Do we know whether the economic growth rate is even 3 or 5 per cent.? The statistical limits that bear on all these macro-economic aggregates are seldom within 5 per cent. We simply do not know whether a change in the position of the indicator is caused by the stretch of the elastic, by the strength of the pull or by a mixture of the two. Over and over again I have found that both Conservative and Labour Governments produce precise figures and talk about 0·9 or 0·8 per cent. when referring to the national income or gross national product or growth and other aggregates, when in fact they have no right to use figures like that at all.
The Chancellor is trying to be neutral but we would be ill-advised to make categorical assertions about the Budget. It must be judged by two basic criteria. First, will it promote growth in real terms? Secondly, does it reinforce the counter-inflation policy? I accept the argument that inflation is a psychological phenomenon to some extent. I accept that, when inflationary expectations have passed a certain point, something analogous to shock treatment for the schizo-

phrenic is necessary, and that that shock treatment can never be advocated as a normal policy at a normal time. But if the patient is to be frozen for heart surgery, one must have confidence that the heart surgeon knows just what he wants and how he is to operate and that he has the will to carry it out to a successful conclusion—and, finally, that his record of operations has a very high rate of success.
I simply do not have this confidence. If weapons of cost and demand restraint are the debit side of the inflationary bookkeeping account, what lies on the credit side? We all know the answers. They are probably summarised best in the phrase "Codex Productivitex". We ask whether investment is adequate and whether it has the right kind of variety. We want all of us—each has his own definition—the industrial equivalent of Doctor Borlaug's "green revolution". We have ways in which to bring it about. What are the right mixes for the United Kingdom? We need to know all the correct forms and patterns of technological and marketing assessments, on which we must depend. What we do know is that the mixtures generally speaking justify a great deal of criticism.
These are fine phrases unless we have—the most fundamental factor of all—resource mobility, which we have not got in this country. Every political and social mechanism is reinforced by one of the world's most powerful and entrenched bureaucracies, existing at State, county, and local levels. The bureaucracy resists the forces encouraging mobility by the most sophisticated and powerful means. The proposals to confer mobility and increase it are considered as anti-social. In some cases, they are completely neutralised and are often very severely restricted. On the other side of the counter-inflation balance sheet, we find ingrowing prejudices, professional buck-passing and institutionalised self-interest of every conceivable type of pressure group, all immensely skilled in preventing things from being done.
It is more plausible and in many cases more pleasureable to attack the symptoms of inflation and of failure than to attack the real causes. The symptoms are disembodied phenomena such as price aggregates and the pressure of demand and the quantity of money and all the


other collective aggregates such as wage rates. Where causes involve people, they are inefficiency, bloody-mindedness, economic illiteracy—which we have on a very large scale—and absurd expectations, from which we are also suffering. All this exaggerates or accentuates the general and inescapable scarcity of resources.
All this lies at the heart of the Budget problem. I merely have time to deal with one other aspect of particular interest. The success of the Budget must be judged in the context of the total prices and incomes inflationary package. We have in this respect a remarkable opportunity to see how it has been done elsewhere. Everyone knows that we have copied the American system more or less lock, stock and barrel. The other day Mr. Grayson, the chief administrator of the two earlier prices and incomes, phase 1 and phase 2, in the United States, and now the chairman of the Joint Cost-of-Living Council in the United States, was asked what he would do now, with the benefit of hindsight, if he had the opportunity to do it all over again. His comments are fascinating. He said, in effect, that he would get away from the whole rigmarole as soon as possible. He was asked whether he would attempt to retain any form of direct and detailed control. His answer was, "No" and he went on to say,
… we need to work more on the basic problems that cause inflation, such as supply problems in agriculture, in the regulated industries, and in agencies of government.
He was then asked:
What do you feel the Price Commission has done to help improve productivity, and what has to be done?
We have no such commission operating in this country. Mr. Grayson said that the Commission
… plus normal fiscal and monetary measures—the underlying forces that create inflation—are the real ways to control inflation.
This is experience of a particularly interesting and valid type, and we should pay very close attention to it.
We should also look at closer to home. Across the Channel in Western Europe we find economies much more similar to our own, where the problems probably arise from the same mix of causes. I draw attention to a particularly interest-

ing document, "Barclays Review". Barclays Bank operates all over Western Europe and it produced this special review. It drew attention to the comparative success or failure of prices and incomes policies throughout Western Europe in the last decade. It is a fascinating document because the conclusion is clear and inescapable. It applies to every single country in Western Europe. The conclusion is that by and large, except for very short periods of shock treatment, it does not work.
If the Government are really serious in attempting to persuade the country that it does work, then the burden of proof resting on their shoulders is very heavy because the burden of evidence is that it does not work in the United States and does not work here. The conclusion is, therefore, that a Budget produced on the assumption that it does work is a burden which the Government will be unable to discharge.
I want to refer to the conclusion reached by the survey, which covered a point made by the hon. Member for Cornwall, North (Mr. Pardoe) when he was somewhat sceptical about monetary integration. It is important. The survey concluded:
The most likely way, however, in which inflation in the Community could be moderated is by means of co-ordinated national and eventually, given the necessary political will, Community level policies.
Indeed, Community level policies are the only thing likely to succeed in Western Europe, and even they are by no means certain to succeed. The survey continued:
Only on the basis of co-ordinated economic policies, with all the implications for national sovereignty, can such problems as inflation be seriously tackled.
That is the gist of what I want to say. I believe that the Budget is interesting. It is likely to be successful only in the most narrow and restricted circumstances. I do not see those circumstances being created. I do not see the measures necessary to produce the dramatic increase in national growth required to enable my right hon. Friend to take the risks he has taken. I sincerely hope that I am wrong. Nothing would please me more, as hon. Members opposite would probably agree if they took their political pants off for a moment, and I hope that this is a fair


risk fairly taken for good reasons. But I do not believe that, when one looks at the whole spectrum of the economic situation, it suggests or supports the policy of liberality which is what my right hon. Friend has put forward. It is not a policy of restraint, of attempting to force us to come to terms with the basic economic realities of the country. No Budget which fails to force us to come to terms with basic economic reality is likely to succeed either for my right hon. Friend or for anyone else.

7.48 p.m.

Mr. Mark Hughes: I shall confine myself to three points, the first of relatively minor importance. In his statement, the Chancellor mentioned the problem of historical documents. I do not know whether the Government have carefully considered the very difficult problem of distinguishing between the commercial value of an historical manuscript and its value to international scholars. Many documents will have slender commercial value, but for international scholars who work on literature and history they would have irreplaceable value. It may be that in the estate duty legislation the relations of these fine distinctions can be most properly dealt with.
So much for the narrow, but for the academic community important, element which I wish to raise. I turn now to what is to the community at large the far more important matter of the Government's creation of national debt. This House 100 years ago had a figure that stalked about it. He was known as the "public creditor". Chancellors from Vansittart through Peel to Gladstone and even Harcourt, whenever placed in a difficulty would, rather like a deus ex machina, draw out the public creditor. He seems to be, not only dead, but buried, cremated and removed entirely with no trace of his existence left on the face of the earth.

Mr. Jay: Like the Tipstaff.

Mr. Hughes: In his place rather than the Tipstaff, the Government Official Solicitor has been dragged out as the deus ex machina.
The first point to be made about the new Government issues is the sheer size of

the £1·4 billion of new Government loans. Whatever their level of take-up, they will clearly dominate, not merely the gilt-edged market, but a wider section of public money borrowing for years to come. Any industrial debenture issue will be in the gravest difficulty. A body which both sides of the House have praised for its activities over a number of years, the ICFC, devoted to aiding and improving the efficiency of small firms, has an 8⅞ per cent. debenture due to mature in 1992–97. In the three days following the Budget it showed an increase in its yield-to-redemption rate of 0·5 per cent.
If the ICFC has to acquire its funds at almost 11 per cent., it is difficult to see how it can be an effective instrument for aiding the small firms with cash flow problems and reorganisation and capital undertaking. An even more important problem is that raised for local authorities in their five-year bonds which also within three days rose to 9·75 per cent., and their four- to 12-years stocks, which rose by a similar amount, to about 9·9 per cent., taking the GLC stock which was issued only a few weeks before the Budget.
It may be argued that these matters do not affect the ordinary man and woman. With local authority borrowing, there are only two possible end payers—either the ratepayer through increased rates, or the taxpayer through increased Government subvention to the local authority. If as a part of a neutral Budget the Government, unwillingly or otherwise, raise the interest rates on local government borrowing by effectively ½ per cent., it behoves them, during phase 2 of the prices and incomes policy to offset that increase. Suppose that a local authority borrows £5,000 for a housing venture—and that sum would scarcely pay for one house. The ½ per cent. increase, if passed on to the tenant, would amount to 50p a week or more on his rent.
Is that neutrality? On the other hand, if the £5,000 is funded and must be dealt with through the rates, the house must carry, because of the additional ½ per cent. interest rate on local government borrowing, an extra burden of about £25 to £30 a year. That money cannot accrue without either the ratepayer or the Government footing the bill. The great risk for anyone in a special development area


is that the very high costs for local authorities preparing industrial sites will become prohibitive. Local authorities trying to provide the infrastructure to attract industry—new sewage works, treatment plants, roads and other services—will, as a direct result of the Budget, find the funding of their capital investment for industrial development more expensive.
It behoves the Government, if they are intent on a policy of higher interest rates, to do something about the problem of how they can safeguard local authorities from the effects thereof. It may be that they have in the pipeline some mode of subsidising local authorities' borrowing costs. If, as with the domestic ratepayer under the Budget, a local authority is faced with new expenses, perhaps the Treasury will give some assistance. But there is no mention of such a scheme of assistance in the Budget, and I may be excused for cynicism if I say that I do not believe that it exists. But clearly it needs to exist, because otherwise any pretence at neutrality in the Budget vis-à-vis local authorities is purely fiction.
I come to the £400 million 3 per cent. issue—one of the most extraordinary pieces of Government funding it has been the misfortune of the House to have to countenance. The Economist is not notorious for its support of the Opposition in economic matters. However, in its issue last Friday it said,
This stock"—
referring to the £400 million 3 per cent. Issue—
is a surtax payer's ramp, much more so than anything else in the Budget. The £100 million of capital gains that will accrue before its redemption in 1979 is a tax-free gift.
This is at a time when we are in the middle of a freeze and the Government are asking wage earners to restrain their wage claims. Yet the Budget offers a £100 million tax-free gift. Nothing could have been more carefully designed to detract from the taking up of this £400 million issue than the precise terms upon which it is offered.
Is neutrality observed and is the concept of fairness answered by an issue which, to a taxpayer on the top 90 per cent. rate of tax, provides the equivalent of 44 per cent. interest? Is an interest rate of 44 per cent. in accordance with

the guidelines of phase 2, phase 3 or any other part of Government policy? I see nothing in this which is other than economically and socially divisive. In many ways it is the most arrant example of the Government giving away to their close friends all the benefits at the expense of the ordinary taxpayer.

8.3 p.m.

Mr. John Loveridge: The hon. Member for Durham (Mr. Mark Hughes) has spoken about high interest rates. We all share the concern that they should be so high, especially for long-term borrowing. This is necessary because of the world interest situation. The cost of money is, however, the root of almost all other costs and any steps which the Government can take to bring down internal interest rates will be welcome.
There are in this country 100 large businesses which produce perhaps half our output. The dominance by this limited number of firms is growing. It is important to consider how far this process can or should continue in the national interest. We owe much to large firms and to their dedicated research teams. But we know from the Bolton inquiry into small firms that small firms are just as efficient and can often be more adaptable and faster to react to changing conditions. I wish to concentrate on the effect of our budgetary policy on this group of smaller businesses.
There are 1¾ million small firms, employing 6 million people and providing a quarter of the gross national product. Are they being helped or hindered in their efforts to play a greater part in our national life? Let me give an example concerned with the new corporation tax. The very small firms will have welcome relief from the effect of the new system when it comes into force after April. The new system also has given favour to our largest public companies by an effective reduction in their taxation. What of the medium-size firms in between? They, instead, are to be heavily penalised.
I have a letter from a fast-growing medium-size firm crying out against the effect upon it of an increase expected from the new system of 25 per cent. in corporation tax. The writer goes on to say about private business
I cannot remember when we have been so severely treated by any Government


It may be thought that this is hardly fair since in many respects my right hon. Friend's tax changes have helped owners of businesses, particularly by continuing the 100 per cent. depreciation and the encouragement in connection with capital investment. The Government have also encouraged smaller firms by their acceptance, in part or in whole, of many of the 56 recommendations of the Bolton Committee's inquiry. However, the letter from which I have just quoted, although perhaps hardly fair to my right hon. Friend and his colleagues, emphasises how frustrated the leaders of small and medium-size firms feel.
Such firms are threatened from three directions at once. Estate duty can cripple or even destroy a firm. Capital gains tax on the sale of surplus assets can, over a period, through inflation become a confiscatory tax, although the roll-over relief is a welcome help. In addition maximum marginal direct taxation in this country is among the highest in the world.

Mr. Mark Hughes: No.

Mr. Loveridge: Certainly it is compared with France or Germany. As well as discouraging initiative, it makes difficult the borrowing of adequate capital for growth on account of the resulting lower net profits.
This process has been carried even further in the Green Paper on the Price and Pay Code, of which my hon. Friend the Member for Basingstoke (Mr. David Mitchell) said last week,
It is the economics of the madhouse to suggest that industry should only be allowed to use a 2½ per cent. net return on its investment …".—[OFFICIAL REPORT, 5th March 1973; Vol. 852, c. 117.]
My hon. Friend showed that this would be the situation which would apply under paragraph 46 of the code.
Direct taxation bears especially hard on the hopes of growth in small firms run by sole traders or in small partnerships. This was the situation of 60 per cent. of the firms which responded to the Bolton survey.
I come to specific recommendations arising from my regrets about matters not included in the Budget. First, on the question of corporation tax, I appreciated the position of the Chancellor of the Exchequer when he said that he could

not help the medium-size firms to the tune of £75 million a year in the present crisis, but I hope he will consider that the reverse of this situation also applies. Why place a new crisis of extra taxation on the medium-size firms among the smaller range of businesses, particularly at a time when their new investment is urgently needed, just as the success of the Chancellor's efforts is being seen as our growth policy is leading to the full utilisation of spare capacity? It is now that we need new investment most of all. Will my right hon. Friend consider this aspect for the future?
Secondly, retained earnings are the lifeblood of small, growing companies, of which the Bolton Report said that no special tax abuse would come about if close companies were allowed to retain all their incomes. Short-fall provisions can lead to over-distribution of income: so let them go.
Thirdly, there should not be discrimination against a man concerning the kind of pension he may take out because he works as a director of a private company instead of working as a director of a public company. He should be allowed to enter into similarly beneficial pension schemes as his colleague in the public company.
Fourthly, on capital gains tax, at least part of the inflationary effect should be taken into account. I hope that the Chancellor will consider a sliding scale reducing the tax by 10 per cent. for each year that an asset has been held by a person who disposes of it. The tax should not be payable on deemed disposals. Clearly, too, the old-age relief on the sale of businesses provision is now out of date and needs reconsideration. It has not been adjusted for some time. I suggest that it would be improved by the addition of a sliding scale from the age of 65 down to 60. This would help small businessmen who wish to give up in favour of younger men and provide them with the encouragement to do so.
Fifthly, regarding estate duty, I welcome the new provision concerning the sales by trustees of quoted shares after death. These shares may well form part of the reserves of a medium-sized company. But, above all, it is the high maximum rates of duty that bear so heavily on the medium-sized firm. These


may cause the sale of part of a firm or even all of it when a death occurs. Even where a loan can be obtained to carry the provisions forward beyond those years allowed by the Government for payment, it may be too heavy a burden to bear; or at least slow down any prospect of growth for a number of years. In this connection the 45 per cent. relief available to agriculture and on industrial properties should be extended to all the assets of the smaller businesses. Why discriminate in favour of the factory owner in particular? And over the question of time to pay, longer periods should be allowed than at present to pay off any severe burden of estate duty threatening the life of a small business. The Chancellor's Green Paper on inheritance tax is welcome, but the main objections to our present duties are the destructive top marginal rates as they apply to the smaller businesses in particular.
Sixthly, the same objection applies to the top rates of direct taxation. The 75 per cent. rate on earned income is far too high and is unfair to those who are trying to compete with companies in Europe where rates may be so much lower than our own. The Chancellor would have given new impetus to the smaller firm to compete with our Europan neighbours if he had cut the top rate on earned income to 60 per cent. I hope that he will do so in future, but I appreciate that in the climate of phase 2 it would not be reasonable to expect an immediate response to this request, although it is a necessary step to improve our competitive edge with our neighbours.
Finally, I do not ask for discrimination in favour of the small businessman so much as a cessation of discrimination against him. We know that much new knowledge comes from the larger companies, but there surely remains a place in this kingdom for innovation from the independent entrepreneur. He still has much to offer. There is still room for a Henry Ford in Western society or, nearer home, for a Nuffield. Let this Government give such men encouragement to build up their firms from small beginnings. Many firms have grown radically in the past 25 years to be substantial and to become public companies. Let this process go on, to

allow growth as my hon. Friend the Member for Croydon, North-East (Mr. Weatherill) once wrote, "From acorns to oaks".
I hope that my right hon. Friend will do his utmost to ensure that the measures I have suggested are brought into effect to make possible improved prosperity for small businesses, for those who work in them and, as a result, for the nation as a whole.

8.16 p.m.

Mr. William Hamling: I note that the hon. Member for Hornchurch (Mr. Loveridge) got away from the usual cry of so many right hon. and hon. Gentlemen opposite that all our economic ills can be laid at the door of the trade unions and the activities of the working class. One of his obiter dicta was that the rate of interest and the cost of money was at the root of the control of our economy, not some of the matters to which a number of his right hon. and hon. Friends have been referring in recent years.
It is remarkable that when capitalism is in crisis the workers always get the blame. I recall that in 1926 all the evils from which our industrial and economic system suffered were laid at the door of the miners. It was said that we could save our economy only if their wages were cut and their hours increased.
Similarly, way back in 1931 we were told by the Press, the Conservative Party, and some of our own friends who were seduced by these doctrines that we could save our economy only if the standard of living of the unemployed were cut. Historically, they were proved wrong and the critics of the unions and the working class today will be proved equally wrong.

Mr. Loveridge: My memory does not go back quite as far as that of the hon. Gentleman on some of these matters, youthful though he is in many respects. Does he agree that both sides of industry, worker and management alike, have much to contribute at this time to the solution of our inflationary problems?

Mr. Hamling: I wish that the hon. Gentleman could persuade his right hon. Friends of that. If so, we could get away from the confrontation policies adopted by the Treasury Bench.
I want to return to some of the general economic policies which are at the back of this debate on the Budget. We have repeatedly said that Government policy must be considered as a whole. In recent speeches I have talked about the contributions that the Government have made to our monetary inflation. Nobody can controvert, and nobody in the debate has controverted, that the major factors in our inflation are the economic and monetary policies being pursued by the Government—their taxation policy, their rent policy, their policy of local government finance and revaluation, and their failure—indeed, their refusal—to control prices. Everyone has noted that after less than three years in office the country faces the danger of a major currency crisis and a major crisis in our balance of payments.
I do not want to weary the House with figures but it has been forecast that this year there will be a deficit of about £800 million in our current balance. I wonder whether those who have made that estimate have taken into account the full impact of the Government's Common Market policy on our balance of payments. I rather doubt it. Indeed, I feel that by accepting the Common Market policies the Government have made the possibility of a balance of payments crisis in the autumn even more likely than otherwise might be the case, and a further devalution of our currency not only possible but probable.
Already the Government have devalued once, or at least have allowed the pound to float downwards. Who knows how far the currency will be further devalued if the Government's present policies are pursued. Does anyone suggest that the present rate can be maintained if the supply of money progresses as at present, or if inflation continues at its present rate? This inflation is largely Government induced because of their acceptance of entry into the Common Market on the terms which they were offered.
One of the notable features of the debate is that leading speakers on both sides of the House have failed to take note of the impact of our entry into Europe on the present level of inflation and on the future possibility for our balance of payments. One notable exception was my right hon. Friend the

Member for Battersea, North (Mr. Jay). How can we discuss the Budget without referring to the many disadvantages that we have incurred in our world trading situation through accepting the Tory terms for entry into the Common Market? For a long time it has been said that entry into Europe is the cornerstone of the Government's economic policy, yet Government speakers have been notable for refraining from mentioning that during these debates.
Certainly the steep increases in prices are due directly to the acceptance of the Common Market terms. That is especially true of the price of food.

Mr. Patrick Jenkin: Nonsense.

Mr. Hamling: I hope that the Chief Secretary will comment on the price of steel when he replies to the debate. I hope that he will also comment on the price of bacon and on some of the other increases in food prices which are due directly to acceptance of the CAP regulations. Everyone knows that these have been a major factor in price increases in this country during the last 12 months as we have drifted away from the policy of agricultural support adopted by the Labour Party when in office and persisted in, and which the Government have done away with as a consequence of entry into Europe.
Do the terms that have been negotiated by the Government permit us to fix food prices? Do they permit us to fix prices at a lower level than they are now? It seems to me that one of the direct consequences of entry is a high food prices policy, and I am rather surprised that my right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins), in his 40-minute speech, did not refer to these major problems when he talked about controlling the price of food.
One of the things that I should like my right hon. Friend and some of my other right hon. and hon. Friends who supported the Government in this policy to tell the House is how they can advocate policies for the control of food prices at the same time as they support the Government's policy on Europe and on food prices. Can we independently in this country adopt a policy of food subsidies of the kind which we operated


when in office, and at the same time accept all the consequences of entry into Europe? I hope that the Minister will enlighten the House on that.
Some of the changes in Customs duty apply not only to food, but also to raw materials. One of the questions that we are entitled to ask all those who accepted entry into Europe on these terms is what effect the changes in Customs duties will have on our industrial costs and on our competitiveness. The effect of devaluation will he to make the consequences worse, because we shall be paying out more for our imports, and continuing devaluation will have an even worse consequence for our balance of payments.
All those who have accepted these terms for entry into Europe must accept the consequences. Those who voted for them have disqualified themselves from criticising consequent Government policies which have allowed prices to increase. The acceptance of these terms has led to a change in our food support policy, and those who support the Government's policies cannot at the same time appeal to the workers for restraint. They cannot do that if they support policies which will push up the cost of living still further. The Government policies have contributed directly to the pressure on the housewife and on the working-class by bringing about a huge increase in the price of food.
I said a moment ago, provoked by a sedentary intervention from the Chief Secretary to the Treasury, that the price of English steel will go up as a direct consequence of entry into Europe. It has been estimated by non-Socialist newspapers that as a result of our entry the price of steel may go up by 15 per cent. later this year, that the price of sugar will increase in July and that bacon prices will rise.

Mr. Arthur Lewis: Is my hon. Friend aware that the Government have said time and again that all these increases will put only 0·0001 per cent. on the cost of living and that this does not mean a thing?

Mr. Hamling: I hope that my hon. Friend has not been deceived by that propaganda, because I am not deceived by it nor are the housewives. We have

seen the way in which food prices have risen in the last two years, and housewives are not deceived even though the Government may appear to be deceiving themselves about what is happening. These are direct consequences of our acceptance of entry into Europe. It is about time in this debate that the real effect of a major part of the Government's policy was understood.
Those who support Tory policies disqualify themselves from putting forward alternatives. Value added tax is yet another consequence of the Government's policy and of entry into Europe. Those who criticise VAT and at the same time support the Common Market policy of the Government disqualify themselves from criticising the consequences of that policy. I say seriously to the Government and to some of my right hon. and hon. Friends that they must honestly face the consequences of these policies. If they support Tory terms for entry into Europe, they must also face the consequences in terms of increased food prices, VAT and the effect on our balance of payments of budgetary contributions. I regard these as major policy matters. When the Press and others are calling for precision in policy, those of us who support the official Opposition line and those of us who oppose the Government's Common Market policy are entitled to expect from our opponents precision in dealing with these policies.

8.30 p.m.

Mr. Cecil Parkinson: I shall not reopen the debate which we have had over a period of 90 days on the Common Market. I must admit that it seemed very like 100 days as I listened to the contribution made by the hon. Member for Woolwich, West (Mr. Hamling), and it brought back memories of those ghastly days when we were forced to listen to speeches by the right hon. Member for Battersea, North (Mr. Jay) making the same speech 80 or so times.

Mr. Hamling: It was a good speech.

Mr. Parkinson: It might have been a good speech, but even good speches become boring if repeated too often. I do not intend to become embroiled in a private argument that is taking place between the hon. Member for Woolwich, West and certain other Labour Members


about our joining the Common Market. At this point of time when we have been a member of the Common Market for some 10 weeks it is not credible to retrace all those arguments and to put the blame for all our problems on that one event.
Having sat through most of the four days of this interesting debate and speaking at the twilight hour on the fourth day, it is not easy to feel that one will make any contribution that is either exciting or interesting to the House. But the opening speech by the right hon. Member for Bristol, South-East (Mr. Benn) provided a reasonable shot of adrenalin for those whose spirits might have been flagging. Many of the right hon. Gentleman's remarks and much of his fervour are fuelled by the very bad conscience which the right hon. Gentleman must have. I cannot stop asking myself why after two years of record pay increases, which nobody denies—and the hospital workers have had a 34 per cent. increase since the Conservatives have been in power—the right hon. Gentleman, who was in a key position in the Labour Government for six years, does not recognise that the more he talks about the plight of the under-paid the more he forces us to question why after Labour's six years of government so many workers remained so poorly paid. Until he produces an answer to that question, much of what he said about the Conservative record in helping the lower paid will be treated with a certain amount of contempt.
I thought the right hon. Gentleman in his speech gave a clue to the way in which his mind works when he replied to an intervention made by my hon. Friend the Member for Bosworth (Mr. Adam Butler). The right hon. Gentleman quoted from a leader in The Times today about the untimely death of the former Member for Sutton and Cheam. He quoted a passage in that leading article in which he spoke of the fact that it was understandable that if one lived in a community where people who do not live to a very high standard catch glimpses of luxury living by people living at a very high standard, albeit transitorily, then one must expect tensions and resentments and some of the unfortunate consequences that stem from those strong feelings.
It seemed to me that the right hon. Member for Bristol, South-East was speaking straight from the heart. He was saying that those conditions exist and that we should ignore the fact that many of the people enjoying the luxury might well be trade unionists on a five-day package tour from New York, people who may well have worked for a very long time in order to pay for that holiday. Any set of circumstances can be misinterpreted, and the people who misinterpret them by implication are justified in doing so. Theirs is a human reaction. Therefore, the attitude is that we should not waste time trying to explain that the people enjoying a little luxury might have worked for it and that it might well have come as a reward for hard work, but that we should pander to the fact that there is a misunderstanding of the situation and must cash in on it.
Throughout so much of what the right hon. Gentleman says about the low paid, the impression is gained that he is repeating the theme used by the right hon. Member for East Ham, North (Mr. Prentice)—namely, it does not matter whether people are right or wrong or prejudiced or misguided if that is the way they feel. Play up to it. In his reply to the intervention from my hon. Friend the Member for Bosworth the right hon. Gentleman gave us a clue about his well-intentioned but totally misguided motivation.
I endorse with enthusiasm my right hon. Friend's commitment to continue for sustained growth. Many hon. Members, including hon. Members on the Front Bench opposite, have very good growth speeches in them. Unlike them, I never had the opportunity to get mine out. However, I know that when I make mine I shall strike a certain chord with them.
I became interested some years ago in a paper which I read by Herman Kahn of the Hudson Institute about world prospects for the 1970s and the 1980s. I was intrigued by parts of the article in which he briefly assessed Britain's prospects unless major changes took place. He said that in his view the British would at worst enjoy a standard of prosperity by the 1980s of 50 per cent. to 60 per cent. of the rest of the West, and, at best, of 70 per cent. to 80 per cent. He said that the British were being out-distanced but they did not apparently mind. He


felt that when they eventually woke up to the fact that they were being outdistanced, and if their achievement was in the 50 to 60 per cent. bracket there would be a wave of national self-disgust and a challenge to many of the basic assumptions on which we base our way of life. He suggested that we spend too much of our time squabbling about how to divide inadequate resources rather than deciding how to generate more resources.
Herman Kahn contrasted our position with that of Japan. One of the most damaging parts of his assessment of the situation, and an interesting one, which I recommend to the House were 15 reasons why the Japanese will continue to grow extremely quickly. He said that the same 15 reasons in reverse would apply to Great Britain.
I do not intend to bore the House by rehearsing the 15 reasons which he gave. When hon. Members have heard a few of them they will understand why I do not rehearse the 15. It seems necessary to go on a course so as to learn the Hudson Institute jargon. I shall give a brief illustration of the jargon. One of the 15 reasons is that the Japanese are—
Economically and patriotically advancement-oriented, achievement-oriented, work-oriented and deferred gratification, loyal, enthusiastic employees—probably increasingly so.
If one gets through the jargon it says that it matters to the Japanese that they are economically prosperous, that they are prepared to work to achieve an end which they regard as desirable, and that they are prepared to wait until they get the benefit of the prosperity which they set out to achieve. "Deferred gratification" is an awful phrase for something which, in my view, is an extremely important element in a society's approach. People accept that if they work hard and they generate work, the results will come through after—not before—the hard work.
It goes on to mention a strong commitment to economic growth and
Relatively few and/or weak pressures to divert excessive resources to "low economic productivity' uses
He is saying there, in other words, that they do not believe in propping up Upper

Clyde Shipbuilders to very little purpose. The
current high momentum of growth facilitates further rapid growth.
In other words, if there is a pattern of rapid growth there is the fuel to sustain further rapid growth.
During the last four days I have listened to speech after speech during which the question has been asked—can we sustain a growth rate of 5 per cent.? My hon. Friend the Member for South Angus (Mr. Bruce-Gardyne), says, with some relish, that he does not think that we can sustain growth at 3½ per cent. My hon. Friend says that we never had and he does not see how we ever can.
As I have listened to several speeches my mind has gone back to the days when I was growing up on the shores of Morecambe Bay. In that area we used to say—my hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman) can confirm what I said in this respect—that if the Lake District could be seen from Morecambe Bay it would rain and, if it could not be seen, it was raining. As I have listened to the speeches of hon. Members I have had the feeling that the attitude is, "We know that times are quite good now, but that is the worst sign of all. It means that they are bound to be bad shortly."
We as a nation have talked ourselves into the belief that we are incapable of sustaining a rate of growth which most people would not find acceptable anyway. The Government, in once again stating their determination to go for growth and to take a slight risk in going for growth and to sustain a pattern of 5 per cent., have taken a vital stand. If we achieve this rate, and continue to achieve it, then in Hudson Institute jargon it could be that a
current high momentum of growth facilitates further rapid growth
Hon. Members should stop talking as if Britain will inevitably be mediocre. By talking like this they may well be making a self-fulfilling prophecy.
My principal criticism of Opposition Members is that in every major Opposition speech we have heard talk of doom, crisis and trouble. My feeling is that hon. Members opposite are obsessed with gloom and cannot talk about anything


else. As I said earlier about the right hon. Member for Bristol, South-East, I have the impression that hon. Members opposite enjoy reinforcing prejudice and backing unreason and militancy wherever they are to be found.
Today the right hon. Member for Bristol, South-East spoke about all the products whose prices had risen but made no mention of the fact that wages had risen twice as fast as prices. That omission was made to delay the message getting through to the people that their standard of living has been rising twice as fast in the last two years as it has for years. One feels that it is a message that they do not want to allow to get through lest the prejudice which they hope to sustain be undermined.
I should like briefly to mention a few of the positive signs. I have mentioned growth. We are now growing faster than for many years. One hon. Member opposite complained that the Chancellor had not discussed the balance of payments situation. My right hon. Friend the Chancellor dealt with that in the Budget speech. The right hon. Member for Battersea, North gave us his view. We now know what that is, and I prefer the Chancellor's view. But to say that the balance of payments situation was not discussed is untrue. It was discussed by my right hon. Friend the Chancellor who takes the view that we are now collecting the worse effects on our imports of our effective devaluation, and that the benefits to our exports will come through later. He believes that world trade will be increasingly buoyant, and we are well placed to obtain our share. All this has been mentioned but, because it does not fit in with the right hon. Gentleman's prejudices and his complete fixation about the Common Market, he gives the impression that the subject was not discussed.
My right hon. Friend the Secretary of State for Trade and Industry mentioned the record orders in the machine tool industry and in engineering—the highest ever. We are told that these two industries are particularly sensitive barometers—but according to the Opposition, not apparently when they are giving out a message which is hopeful. Then they are to be ignored.

Mr. Sheldon: The hon. Gentleman has referred to the Secretary of State for Trade and Industry, who made a speech which I thought was less than full and fair. In the same week that he gave these optimistic figures, the very latest figures for manufacturing investment showed that it had turned down yet again in the last quarter of last year.

Mr. Parkinson: I hope to come to that question later. Again, it makes no difference to what I have just said about the order position in these two industries. When the order position is low that is regarded as significant, but when it is high it is regarded as not very important.
There is no mention of the fact that unemployment is falling or that 14 businessmen are expecting to export more for every one businessman who is expecting to export less, and that 37 are expecting to do more business for every one expecting to do less. There is no mention of the fact that investment intentions in industry are beginning to build up. I agree that we start from a low base. But the right hon. Member for Birmingham, Stechford and many of his hon. Friends, notable by their absence from the Opposition Front Bench nowadays, share a large proportion of the blame for the low rate of investment in British industry, and a large share of the blame for the high rate of under-utilisation of capacity in recent years.
There is no mention of the expectation that if the J curve works as it usually does, then by this autumn our export position should start to get the benefit of last June's devaluation. There is no mention of the doubling of the rate of increase in improvement in the standard of living.
In conclusion, I believe that there is no point in pretending that there are not injustices and unfairnesses in our society. Listening to the right hon. Member for Bristol, South-East I sometimes feel that one of his problems is that when he was young he read about them, and that to him they are something which he has heard about but nothing that he has experienced. That is why so often there seems to be a sort of novelty about them.
When I return to the town in which I was brought up, in north Lancashire, which was never by any stretch of the imagination a wealthy town, I see people


enjoying a standard of living which they simply would not have believed possible at one time. I see old people better looked after. I see better housing in the town. We do no one a service if we pretend that our problems are solved, but, equally, we do a great disservice by harping on the divisions and inequalities in our society and pretending that only one side has any concern for them.
In conclusion, Mr. Deputy Speaker, I would say that as a nation, we are dealing with many of our problems. Life is getting better for many, and for the most deserving. The continuance of this process will have nothing to do with the extension of the principle of nationalisation, and nothing to do with phoney agreements with the TUC. I remember that right hon. and hon. Members opposite and their party campaigned in 1964 on the slogan, "Let Labour speak with labour"—and a fat lot of good it did them when they came to power and started trying to behave like a Government instead of an extension of the trade union movement.
In going in for growth, my right hon. Friend is doing the right thing. He is taking a chance but it is a chance worth taking, for on growth depends the answer to so many of our nation's problems.

8.51 p.m.

Mr. David Marquand: At this stage of the evening I hope that the hon. Member for Enfield, West (Mr. Parkinson) will forgive me if I do not take up his argument in detail. I hope also that he will acquit me of discourtesy if I say that the most welcome of his remarks came towards the end of his speech, when he said "In conclusion, Mr. Deputy Speaker".
There has been a curious sense of unreality about this debate during most of the past four days in that we are debating the Chancellor's Budget judgment and the economic strategy for the coming year in the shadow of one of the most serious international crises which the world financial system has known for a considerable time. We still do not know what will come out of it. I do not think that any hon. Member believes that the situation as it is now is likely to last for very long. I am sure

that we are likely to see more such crises in the next few months. I hope that the hon. Member for Enfield, West will acquit me of being too pessimistic when I say that, since I am sure it must be common ground between the two sides.
A rather depressing piece of conventional wisdom seems to have developed—it has been evident on both sides throughout the debate—in relation to the European aspects of the present international financial crisis. Everyone seems to agree that it would have been undesirable if the Chancellor had been able to achieve success in the negotiations and had been able to take part in a combined float. I do not agree. It is entirely right that the Chancellor could not possibly take part in any combined float save upon the terms he tried to secure, but I believe that the situation we are in now has clearly demonstrated that a nation State of the size of this country, or the size of any of our counterparts in Western Europe, can no longer control its own economic affairs because international capital has escaped from the the control of democratically elected Governments. That is a fact of life.
Every major currency has been toppled in the past few years, or, alternatively, has been forced into revaluation against the wishes of the Government concerned, because international finance is no longer controllable by national Governments. It has happened even to the United States, the strongest economic power in human history.
Against that background, it seems to me to be foolish for hon. Members—if I may say so, I apply this especially to us on this side, who believe in the necessity for democratic government to control economic power—to turn their backs on the whole concept of economic and monetary union in Western Europe. I believe that the only chance for a Socialist movement in Europe ever to be able to control international capitalism lies in developing a monetary union eventually in a Socialist direction.
All sorts of preconditions must be insisted upon, of course. It would be insanity for this country to take part in any kind of monetary union unless it secured as a quid pro quo a far more effective and far more generous regional policy than has yet been contemplated. I do not think that what was agreed


upon at the Paris summit meeting last autumn can be regarded as being in any way more than a small first step towards an effective Community regional policy.
I would remind hon. Members, however, and hon. Members on this side of the House particularly, that if we could get an effective Community regional policy, this country and the depressed regions particularly would have a very great deal to gain from it. There is only one region in the United Kingdom which has a per capita income higher than the EEC average, whereas all regions, even the most depressed regions, in the Federal Republic of Germany have a per capita income above the EEC average.
If we could get an effective regional policy which involved a really significant transfer of resources from the prosperous regions of the enlarged Community to the less prosperous regions of the enlarged Community, this country would benefit more than any other member of the EEC, except for Italy. [Interruption.] My hon. Friend the Member for West Ham, North (Mr. Arthur Lewis) thinks that this is impossible. I think he takes too pessimistic a view. We have some leverage inside the Common Market, and if we fought hard enough for it—it would take too long now to explain in detail how we could do it—we could get the kind of regional policy which would make membership of a monetary union not something to be feared but something to be looked forward to by people in this country.
The second point that I want to make will be less acceptable to hon. Members opposite. It proceeds from what the hon. Member for Enfield, West was saying when he was criticising my right hon. Friend the Member for Bristol, South-East (Mr. Benn) for what he had said about the causes of inflation. I think that the Conservative Party has simply failed to understand what is really behind the inflationary pressure that exists in our society today. All over the Western world—not only in this country, not only in countries where there are dangerous firebrands like my right hon. Friend egging on the working class—I say that in quotation marks—there has been the same phenomenon. In fact, the rate of inflation has been a lot worse in some other countries than it has been here.
Why has that happened? It is because all over the Western world, and not only in this country, because of the effect of the mass media and the effect of improved educational standards and a whole host of other standards, working people have realised the extent of the inequalities in society in a way which they never did before. They are no longer prepared to support them. Therefore, they have taken the only way out which exists for them, and that is the way out—I believe it to be a self-defeating way out—of pressing for ever higher money wages. That is the real social background to the present inflationary explosion.
Therefore, it follows—and this is the point which hon. Members on the Government side have failed to understand—that one cannot hope to deal with the real pressures lying behind inflation unless one attacks inequality in society at its roots. It is not a matter of what has to be done to make a bargain with the trade union leaders. It is a matter of what one has to do to change society so that the resentments and the frustrations which have piled up no longer exist.
That is the real charge against the Conservative Party. This is what the Government have failed to do in every single Budget which they have presented. They have made inequalities in our society worse than they were before. They have added to the resentments. They have created greater social injustice and a greater sense of social injustice. That is the real charge against them, and that is why their policies will collapse in ruins.

9.0 p.m.

Mr. Joel Barnett (Heywood and Royton): I shall be dealing with some of the points to which my hon. Friend the Member for Ashfield (Mr. Marquand) was referring a few moments ago but first it is right that I should congratulate my hon. Friend the Member for Chester-le-Street (Mr. Radice) on an excellent speech. I am sure that we were all very pleased to hear his kind remarks about his predecessor Norman Pentland, whom we all respected and admired. Judging by his speech, my hon. Friend will clearly be a first-class representative of his constituency and an excellent Member of the House. I hope that we shall hear him often.
I begin by congratulating the Chancellor on his policy of continuing to go for


growth. It will be known that it has been a policy I have personally advocated for a long time, and not only from this Dispatch Box. I noted that he committed himself only until the interesting year of 1974. However, I would not wish to detract from my congratulations but that is where they end.
I am not a natural pessimist but I fear that the Chancellor's growth policy is doomed to failure out of his own mouth when he says that it depends upon the success of his counter-inflation policy. I do not say that with any particular relish because someone must sometime win the battle for growth if we are not to become the poorest nation in Europe, as was mentioned in the report referred to by the hon. Member for Enfield, West (Mr. Parkinson).
That is why I believe that this year's Budget is one of wasted opportunity. The Chancellor had a chance to create a climate to enable the nation to move away from industrial strife, caused to a considerable extent by his own policies and not least by his policy of compulsory wages control. The Government could have moved to a policy of industrial peace based on a voluntary incomes policy against a background of fairness in tax and social policies. That would have meant not a neutral Budget but one that neutralised all the previous Budgets of the Chancellor. We are told that the voluntary policy has failed. I wonder whether that means that the Chancellor intends to have a permanent compulsory policy or even one for the foreseeable future, as the hon. Member for Leek (Mr. Knox) said the other day. I would assume not. If, however, he is to return to a permanent voluntary policy, what grounds does the Chancellor have for believing that it is likely to be any more successful under him in the future? The answer is that he has no such grounds. Yet we must make a voluntary policy work. Indeed, the Chancellor's own sustained growth policy depends upon it.
I should like to examine the Chancellor's proposals to see whether they are likely to achieve that kind of policy. His own analysis shows how foolish it is to boast of having achieved a 5 per cent. level of growth on its own. It is like a juggler boasting about having one ball

in the air when he has dropped the other three, because the Chancellor knows more than anyone that he must get them all in the air at the same time. If he is to sustain long-term growth he must have increasing industrial investment, a good balance of payments position and a successful counter-inflation policy. I doubt whether even he would claim that he has even remotely achieved any of those, although to judge from the remarkably complacent speech by the Secretary of State for Trade and Industry one would think that all his troubles were over; but I am not too sure whether the Chancellor would entirely agree with his right hon. Friend.
I should like to examine the prospects for each of the items in which the Chancellor needs so desperately to succeed to achieve his policy. There is nothing new for investment in the Budget except, as the Secretary of State for Trade and Industry told us, the constant catalogue of all the wonderful things that the Government have done more than ever before. The trouble is that vital manufacturing investment, despite all those things, has declined. Now it is forecast to rise this year. I do not wish to be too unkind to the Chancellor, but last year a 10 per cent. fall in manufacturing investment was preceded by a statement from him that he expected a recovery of private investment including manufacturing investment.
I agree that in a mixed economy companies will not invest unless they see a profit. Incentives are therefore only of marginal value. If anything they are probably too high. We now have lavish incentives coupled with massive disincentives of high interest rates, a prices code and industrial chaos.
The Chancellor misled industrialists when he said in his Budget statement:
There is no bar whatever to increased earnings"—
in the case of companies with
a bigger turnover on the home market"—[OFFICIAL REPORT, 6th March 1973; Vol. 852. c. 239]
Strictly, that is true, and the Chief Secretary today tried his best with it. But the code, in paragraphs 38 and 39, makes nonsense of it. There is a definite bar, because it talks about the "net profit margin" being kept the same as it was previously.
If prices and everything else remain the same on a higher turnover, there will be the same gross profit. Even that is not altogether certain, because with new plant and longer runs a higher gross profit margin would be expected. The net profit could be, and certain should be, much higher.
The Chancellor expects companies to reduce prices, and the Chief Secretary used as his defence paragraph 40 of the code. The words of the code are quite clear. Companies will be expected to reduce prices of goods already sold under long-term contract and, in some cases, actually delivered. In the present form of society it is not really surprising that companies do not increase investment. Indeed, it would be surprising if they invested at all.

Mr. Patrick Jenkin: I do not want the hon. Gentleman to be under any misapprehension about what I said. I was addressing myself, as was my hon. Friend the Member for Horsham (Mr. Hordern), to paragraph 36, which is about price reductions where there have been reductions in allowable costs. I was not addressing myself to paragraph 40.

Mr. Barnett: I am obliged to the hon. Gentleman for agreeing with what I said. He was talking about allowable costs and not denying what I said. If he was denying it, perhaps he will tell us. I see that he does not.
The Minister is telling companies in effect that they should give away profits before they even know whether they will get them. That is precisely what he is doing with the code. Yet at the same time he expects companies to invest with the profits they may or may not have.
I believe that price control of major companies is essential. The Opposition are obliged to the Government for setting up the machinery for us. If they are not prepared to follow through the logic of their own policies and have more public ownership, as, for example, a State holding company to provide investment, a Labour Government certainly would. How much better it would have been if a major part of the £3,000 million of tax reductions that the Chancellor is constantly boasting about had gone into investment.
If the one requirement of sustained growth—investment—has failed, what about the other vital aspect of the Chancellor's policy—the balance of payments? I do not envy the Chancellor having to cope with a difficult enough problem of sterling when on top of it he is in the middle of an international monetary crisis. I am delighted that he has refused to join the Community float. I regret that the present situation does not allow international agreement but I am not disappointed, unlike my hon. Friend the Member for Ashfield, because I have never believed that an economic and monetary union was a proposition before 1980. Even those countries joining in the float are retaining the right to change their parity, for the obvious reason that national interest comes first and is likely to continue to do so for the foreseeable future.
The conditions which the Chancellor laid down for his entry to the float were surely impossible to meet. I can only assume that he was not serious in putting forward such demands. If he was, he was going about it in the strangest possible way. It is like a man going to his bank manager for an overdraft with an unlimited guarantee but being unable to say when he could repay it and, of course, wanting special low interest rates. The manager, trying his best to be helpful, would say "What are your credentials?" The Chancellor would no doubt say "I have just run up a £4,423 million overdraft and I have no plans to reduce it." The manager, still trying his best to help, would say "I suppose the least you did was to use the money for investment in new plant." The Chancellor would have to say "No, I am afraid not. I gave it away in a £3,000 million tax bonanza."
I am sorry that the Chancellor was not in a position to get those guarantees because at some time in the future cross-guarantees and international co-operation will have to be recognised as the only way to beat the speculator. Unfortunately, the world is not yet ready for that situation. Even if the Chancellor's conditions had been met, in practice they never could have withstood the pressure they were likely to be under.
Meanwhile, I hope it is not asking too much to ask the Chancellor to explain


to his hon. Friends why they should stop boasting about the repayment of foreign debt and get ready to defend the almost certain new position of substantial foreign debts that will be coming over the next year or two. It is easier to defend that situation than the £4,423 million of debt due to be financed partially by tempting in hot money through interest rates whose average yield is the highest since 1731, and partially to be financed by further substantial concessions to the surtax payers, made all the more generous, as the right hon. Member of Birmingham, Stechford (Mr. Roy Jenkins) pointed out, by the Chancellor allowing loan interest to be deducted for tax purposes.
The Chancellor has created, as many of his hon. Friends have told him, an interest rate war. I never could understand the Chancellor and his hon. Friends being prepared to borrow at rates as high as 11 per cent. money which could well go out as quickly as it came in while at the same time not being prepared to borrow at lower rates for official debt money on which he would at least know that there were agreed terms as to when it would go out. The best that can be said about the present negotiations is that they are not the end of the story.
I hope that the Chancellor is right about the visible trade forecast. It appears that very few people seem to agree with him. If he is wrong, the massive speculative funds now running loose must surely be waiting to pounce with fateful consequences both for his counter-inflation policy and for the balance of payments.
There are some who talk about the joys of floating as if the millennium had arrived yet there is a great danger of getting the worst of all possible worlds, with a further gradual sinking. That would mean, yet again, just as we are coming to the point where we can get some advantage from devaluation, that we would start to get all the disadvantages.
I am not a fan of floating. Our foreign trade and economic management have enough difficulties without the additional hazard of the financial uncertainty of floating. But I recognise that there is no alternative at the present time. As the hon. Member for Kingston-upon-Thames

(Mr. Norman Lamont) said, we cannot go on giving speculators a one-way option. Sooner or later, however, we will have to get back to fixed parities.
If the prospects for industrial investment and the balance of payments do not look too rosy, the counter-inflation policy of the Chancellor is in tatters. We have been told that we on this side take a pessimistic view of the situation. What else can one do? One has only to step outside or read a financial newspaper to have that view confirmed. It is nothing to be pleased about. It does not help to pretend that everything is going wonderfully well. If it is, the Chancellor has deceived his supporters and the nation, who thought that he had reversed all his previous policies because there was a serious crisis, which of course there is. It will not wish itself away and it will not go away by his hon. Friends simply cheering him on.
Any successful counter-inflation policy must be acceptable to the nation. That means an incomes policy—and I make it clear that I mean a voluntary policy because, as I am sure most hon. Members agree, the experience we have had shows that a statutory policy simply will not work. I cite the Prime Minister as evidence of that and leave hon. Members to read his speeches to confirm it. I believe that it needs a compact with the working people and with their wives in particular. That does not, however, mean a formal detailed agreement with the TUC. It could not deliver anyway. One has not a cat in hell's chance of getting general acceptance for a voluntary agreement without a totally different tax philosophy from the one the Chancellor continues in the Budget. That is why I say that it is a Budget of wasted opportunities.
A quick glance at what the right hon. Gentleman has done compared with what he should have done shows what I mean. We are to have a land hoarding tax but, as many hon. Members have pointed out, it will not make a scrap of difference to the price of a single house. The Chancellor totally underrates the ingenuity of the developers. When he talks of unjustifiable delay, I do not care how he defines that phrase—I have no doubt that the developers will find a way round it, just as they have found a way round Section 482, under which the Chancellor


and the Chief Secretary constantly claim that all gains from speculative land are fully taxed. But the right hon. Gentleman knows that not one person has ever been caught by that section.
If the Government will not nationalise development land, which is the only solution to stop the speculative gains, then at least the right hon. Gentleman might have taken the opportunity of stopping the roll-over relief which allows a farmer to make massive profits and then avoid every penny of capital gains tax. He might also have stopped the 45 per cent. agricultural relief of estate duty. He knows that there are stocks of woodland available at a moment's notice so that wealthy men on their deathbeds can avoid the bulk of their estate duty and at the same time push up the price of land.
So the Chancellor has done nothing about house prices and nothing about mortgage interest, except push it to astronomical heights. He might have done a little about it if he had used a little of the money he had available to help building societies by reducing a proportion of their tax burden. There is nothing about that and only a trifling amount for rate poundage. In most towns and cities, domestic ratepayers will be affected not at all except for a very small amount related to revaluation.
Then we have another example of the right hon. Gentleman's "fairness", in that he first threatened to put value added tax on children's clothing and shoes and then, after great pressure and in typically disarming manner, admitted that he was wrong. I wonder what the Financial Secretary will say. We heard rather more from him in defence of VAT. I hope that the right hon. Gentleman will not expect fulsome gratitude for his concession any more than someone who threatens to kick one in the teeth and then changes his mind should expect it.
I hope that we shall hear no more now about the broad-based tax free from anomalies. Twiggy at least will prevent the right hon. Gentleman from claiming that. I really cannot understand his argument about price increases and VAT. I always thought that the Chancellor believed in the honesty of the local shop keepers. Why then all this elaborate precaution, the advertisements and the shoppers' guide? Does the right hon.

Gentleman think that the average housewife is going to telephone her local weights and measures inspector after doing her shopping, and that even if she does so anything will be done about it? Of course there will be price increases from VAT.
The Chancellor has a strange idea of fairness. Four pence of the national insurance stamp will be deducted from the lower paid. I assume that with the money he will buy shares—not, of course, in Rolls-Royce or the Civil Service or the nationalised industries, but in order, as the hon. Member for Kingston-upon-Thames said, to convert trade unionists into capitalists. I do not know whether that was what the Chancellor had in mind.
But perhaps the most outrageous thing of all, something which perhaps sums up the right hon. Gentleman's tax philosophy and which has been condemned by many hon. Members, including some hon. Members opposite, is his decision to give £110 million in a full year in order to reduce the price of sweets and chocolates and lollipops after receiving £20 million through the increase in the price of school meals and £9 million from removing free school milk from so many children rather than putting anything on, for example, family allowances, a great deal of which could have been recouped by tax clawback.
We had a remarkable statement from the Financial Secretary. He said that children would spend less on sweets and then there would be more available for mothers to spend on food. I do not know what sort of world those in Great George Street live in, but the hon. Gentleman must know that most children get a very small amount in pocket money and that they have only a small sum available for sweets. What will happen is that manufacturers, as they have already pointed out, will simply increase the size of the lollipop and the children will spend every bit as much as they did before.
VAT has been condemned by many hon. Members on both sides, not least by those concerned with the dental profession, and against this background of unfairness pious leaders in The Times and patriotic exhortations from the Lord Chancellor or from the Chancellor of the Exchequer and the Prime Minister


to low-paid workers on strike are plain humbug. They totally fail to understand the frustrations of moderate, decent workers. These are not sour-faced men and women, as the Chancellor would have us believe in his television speech last Tuesday evening. What he said is not likely to improve the climate to enable him to achieve the voluntary incomes policy on which sustained growth depends.
Such workers do not begrudge their higher-paid fellow workers colour television or holidays in Spain. They simply ask for enough food, clothing and housing for their families. To blame these workers is to fail to understand the reasons for industrial chaos. The Government are responsible for increasing workers' expectations beyond those which any Government can fulfil in the immediate future.
It is true that as a nation we are living beyond our means. There is a need for restraint or, as the hon. Member for Enfield, West pointed out, deferred gratification. But that is just one more reason why the Government's schizophrenic approach is absurd. On the one hand, the Chancellor of the Exchequer boasts of an 8 per cent. increase in personal consumption. On the other, he says that there is a crisis which he knows was caused by that increase. He cannot expect a great national response without being more open and honest. The nation will accept restraint for the average-paid worker as well as for the higher-paid worker, but it must be shared equally. The foolishness of the Chancellor of the Exchequer has made it all the harder for future Governments to persuade the nation to accept such restraint.
That is why the Chancellor stands condemned, for at such a time he has introduced a Budget which is not neutral. In the main, £300 million of it will go to higher income groups and investment groups. This was implicit in last year's Budget, but it is effectively in this year's Budget. The Chief Secretary tried to explain that the surtax payer will have a very difficult time. But, as my right hon. Friend the Member for Leeds, East (Mr. Healey) pointed out, the surtax payer will have to pay surtax which he

owed any way, and he will be given three years in which to pay it.
The only example of fairness which the Chief Secretary was able to give was the case of a man with investment income of £4,000 a year who, apparently, was being treated so unfairly. The Chancellor of the Exchequer was offensive when he said that the old and retired can have a proper share only if others do not take more than their fair share. That is true. But it is not the moderate, low-paid worker on strike who is taking more than his fair share. The right hon. Gentleman addressed his remarks to the wrong people. His words serve only to indicate the lack of understanding of the extent to which his philosophy makes him incapable of coping with the legitimate demands of working people in a modern State.
I therefore ask my right hon. and hon. Friends to vote against the Budget and its tax policies by voting against one resolution, not only because in the midst of an economic crisis it maintains the present level of surtax, but because it continues previous Budget policy and persists in giving large real increases in income to the wrong people.

9.29 p.m.

The Chancellor of the Exchequer (Mr. Anthony Barber): I must begin by apologising to the House for having missed so much of this debate because of the international monetary situation and in particular because I had to be in Brussels for the whole of Thursday. However, I have been given by my Treasury colleagues a full and, in some respects, very colourful account of some of the speeches which have been made.
When I was in Paris on Saturday at the meeting of the Group of Ten I told some of the other Finance Ministers how I had said in my Budget Statement that I was sorry that, because of the forthcoming meetings, I should not be able to listen to the whole debate and how one right hon. Gentleman—I think the right hon. Member for Cardiff, South-East (Mr. Callaghan)—whispered very loudly, so that the whole House could hear, "Lucky man". I will only say that the Ministers took the point, but I seriously very much regret not having been here to listen to most of the debate.
We have just listened to the usual courteous and agreeable speech by the hon. Member for Heywood and Royton (Mr. Joel Barnett). I admit—I think that this will probably apply to most of those who were in the House when he opened his remarks—that I did not quite follow his reasoning about the balls. However, I do not think we should pursue that matter at this moment.
I very much regretted missing the maiden speech by the hon. Member for Dundee, East (Mr. Machin)—I have been told that the hon. Gentleman spoke up well for his constituents—none the less so because I understand that he is a native of Yorkshire. As a fellow Yorkshireman, I must say that for a Yorkshireman to represent a city as characteristically Scottish as Dundee is an extremely remarkable achievement.
Today we have had another maiden speech, this time by the hon. Member for Chester-le-Street (Mr. Radice). He will obviously be fully occupied with his constituency duties, because he told us that he has to look after 40 working men's clubs. I am sure the whole House wishes both hon. Gentlemen well.
I should again like to acknowledge the inevitable difficulties which those who speak from the Opposition Front Bench are bound to have. It is no easy task. While I shall have something more to say later about right hon. and hon. Gentlemen opposite, I think it is right to acknowledge that the task of those who lead for the Opposition on Treasury matters is no easy one.
I should also like to thank the Revenue Departments and my three Treasury colleagues who have borne a considerable load during the past year.
While talking to Treasury Ministers, may I say I am glad that the economic expertise on the Opposition benches will now benefit from somewhat greater consistency of principle by the presence of a distinguished previous holder of the posts of Minister of State and Financial Secretary—the hon. and learned Member for Lincoln (Mr. Taverne).
I was particularly sorry that I did not hear the speech by the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins), but I know that he will understand. He referred to the international

monetary situation, as did my hon. Friends the Members for South Angus (Mr. Bruce-Gardyne) and for Kingston-upon-Thames (Mr. Norman Lamont) and the right hon. Member for Battersea, North (Mr. Jay). At the outset it is right that I should deal with this matter and report to the House.
The House will recall, without my going over the details, that in my Budget Speech I described what had happened at the meeting of the Finance Ministers of the EEC countries which took place on the Sunday before Budget Day. The nine of us met again in Brussels last Thursday, 8th March. We did so mainly to prepare for a wider ministerial meeting the following day in Paris, at which we were joined by the Finance Ministers of the United States, Japan, Canada and Sweden, together with representatives of major international economic organisations.
We concluded that the existing relationships between parities and central rates corresponded broadly to the economic requirements and that joint action should be taken to ensure an orderly exchange rate system. We therefore commissioned some special studies by experts preparatory to a further meeting of the same group on Friday next. However, it was also clear that it was highly desirable for the EEC to reach a decision on the mutual relationships of our own currencies as this would affect the character of international co-operation on a wider basis.
Yesterday, therefore, I joined my European colleagues again in Brussels for further talks. An important question before the meeting was whether we should take a major step forward towards the economic and monetary union of the kind which I had outlined the previous week or whether action would be confined to more limited move. It was clear that it would not be possible to agree at this stage on a far-reaching step and that the majority of the Community would support a more limited step on the lines which had been put forward by the Commission. I explained that it was not practicable in present circumstances for the United Kingdom to join a common float on the basis of the sort of conditions embodied in the Community's scheme. Italy, the Republic of Ireland


and the United Kingdom are outside these arrangements for the time being.
The position of the United Kingdom on this matter is fully understood by our partners in the EEC. Moreover, studies will continue to be pursued on various ideas put forward with a view to developing arrangements which would bring forward the time when this system could be joined by the United Kingdom, the Republic of Ireland and Italy.
The German Finance Minister, Herr Schmidt, suggested the possibility of a Community guarantee of the sterling balances, and this suggestion will be followed up by detailed studies in the Community. There would, of course, be full consultation with the holders of these balances if new arrangements were to be proposed as a result of these studies. The present sterling agreements remain in force.
On Friday next we meet again in Paris in the larger grouping which met last Friday to resume our discussions in the light of the decisions taken meanwhile about the European arrangements. There is one thing on which we are all fully agreed—and the right hon. Member for Stechford made this point—namely, that the recent disturbances have underlined once again the urgent need for an effective reform of the international monetary system. In a fortnight's time I shall be attending the ministerial meeting of the Committee of Twenty in Washington to press forward with that long-term reform.
Meanwhile, as the House knows, the foreign exchange markets remain formally closed until next Monday, 19th March, and on this I should make one point clear. When I told the House some days ago that the foreign exchange market was formally closed, I pointed out that the arrangements were quite different from those on previous occasions and I explained that normal operations by commercial banks were largely unaffected. As some misunderstanding on this has persisted, it may be helpful if for a brief moment I revert to the matter now.
Many thousands of separate transactions take place in the market on a normal day. The majority, and certainly the largest in volume, are transactions by authorised banks in connection with visible and invisible trade. Others are concerned with the taking of deposits by

banks, meeting travellers' needs for foreign currency and so on. On past occasions when the foreign exchange market has been closed, authorised banks have not been permitted to function in the market except for a very narrow range of essential business—for example, putting through contracts in foreign exchange already entered into or meeting the essential needs of travellers. On the present occasion it has not been necessary to take such a step. What we have agreed, in conjunction with our European partners, is no more than that the central bank in each country would refrain from intervention in the foreign exchange market, and except in that very limited sense the market is functioning as normal.
I opened my Budget Statement by stressing that the central objective of our economic strategy is to maintain a faster rate of economic growth and that a key part of that strategy is to control inflation. I do not think that during this debate—either in those parts of it to which I have listened or those which I have read in HANSARD—aright hon. or hon. Member has raised serious objections to the two principal implications of that policy. Our need for a high and sustained growth rate is acknowledged on all sides. It was mentioned particularly by my hon. Friend the Member for Enfield, West (Mr. Parkinson) and only a moment ago by the hon. Member for Heywood and Royton. It is pressed on the Government from the TUC and CBI alike, and from both sides of the House. I thank the hon. Member for Ashton-under-Lyne (Mr. Sheldon) for his generous remarks and the support which he gave me and which I read in columns 705–6 of HANSARD of 8th March.
Growth is the key to our long-term prosperity. We need a high and growing level of demand to give confidence to businessmen to invest and to expand their productive capacity. In this way growth breeds growth—just as stagnation breeds stagnation. The faster productivity rises, the easier it will be to keep competitive with the rest of the industrial world and to keep our own prices stable.
The right hon. Member for Leeds, East (Mr. Healey) complained about the position of the low paid, but a rapid rate of growth—the main purpose of the Budget—is the best and indeed in the long run the only way to improve living standards


for the low paid as for everybody else. The Labour Government surely learned by bitter experience that a policy of restriction harmed the low paid twice—first by tax increases which they felt obliged to impose, and secondly by slow growth in national output and living standards.
The past 2½ years have seen a remarkable improvement in living standards, an improvement which, as my hon. Friend the Member for Aylesbury (Mr. Raison) pointed out on Thursday, has been widely shared. I wish to give the House some figures of net income—that is, income after taking account of pay increases, price increases and, as appropriate, family allowances, FIS, tax, national insurance contributions and charges for school meals, milk and health services. I think hon. Members will agree that it is net income in real terms which is probably the best yardstick of the standard of living.
Let us take the situation of a married man with two young children whose earning were £15 a week in October 1970. During the previous six years under the Labour Government that family's real income increased by an average of 2·7 per cent. a year, but during the following two years under the present Government the increase has been 6·3 per cent. a year—well over twice as fast. Therefore, it is nonsense to say that the general position of the low paid has not improved under the present Government. Indeed at every level of income it is true to say that living standards—by which I mean net real income—have improved very much faster under the Conservative Government than under Labour. That is a consequence of policies of faster growth, lower taxation and more help for those in need.
In my Budget speech I set out the reasons for believing that it should be possible to sustain growth at around 5 per cent. over the next year or so. In this debate some hon. Gentlemen have expressed fears that to do so will run the risk of overloading the economy, or that this rate of growth will damage the balance of payments by diverting exports into the home market and by sucking in imports.
First, as to the sustainability of our present rate of expansion, I have taken

full account of what might be termed those signals, such as the level of unfilled vacancies, which suggest that the pressure of demand is high, but having regard to the many other indicators, such as the level of unemployment, the degree of capacity utilisation in the manufacturing industries, and the extent of overtime work, I find it hard to accept that we now have to rein back our rate of output to 3 or 3½ per cent. a year. This is not to say that a 5 per cent. growth rate is sustainable indefinitely. No one at this stage can say what our underlying growth of productivity and potential will prove to be in a year or so's time.
It may be that some moderation in the rate of expansion will occur in due course without necessarily requiring any increases in taxation or other action. As I said in my Budget speech, the rate of growth of public expenditure on goods and services will slacken considerably after the middle of this year. It is quite possible that this will ensure that the pace of expansion will ease off without any restriction on the growth of personal consumption.
The right hon. Member for Leeds, East shared my concern at the disappointingly low level of investment during the past year. However, I found difficult to understand how he thought that investment could increase if we adopted a policy which kept prices controlled but pay uncontrolled. I should have thought that it was self-evident to anyone that that sort of policy would leave firms squeezed dry and unable to invest. That policy, which I understand is now the official Labour Party policy, would be the death of growth.
The second doubt that has been expressed about the pace of current expansion is that it may pose a threat to the balance of payments. It is undoubted that a high level of domestic demand produces a high level of imports. However, I hoped that the thesis for so long prevalent in the United Kingdom, that a sharp curtailment of domestic demand was the only proper way to redress a balance-of-payments deficit, was not now entertained by any serious critic. If the balance of payments were in serious disequilibrium as a result of excess domestic pressures, such a solution might be appropriate, but we are not in that position.


I see no reason to qualify the view which I gave in my Budget Statement—namely, that the surplus on invisible account this year should offset much of the visible trade deficit.
I have been surprised at the criticism—although in the speeches which I have been able to listen to most of that criticism has sounded somewhat muted—about our decision on pensions. I am astonished that criticism should come from the Labour benches. The increase of £1 a week on the single pension has been equalled in cash terms only once before. The 1971 uprating was also £1, but that increase covered two years. Making that allowance, the pension increase is the largest ever made. To compensate for the rise in prices since 1969, which was the last increase under the Labour Government, pensions for married couples would need to have gone up by about £2·30 to compensate for the rise in prices since August 1969. Since June 1970, which was the time of the election, the figure would be about £1·80. That is what would have been required to deal with rises in prices. In fact, the pension has already been put up by this Government by £2·80. After this year's increase it will have gone up by £4·40.
The £1 a week increase in pensions represents an increase of 15 per cent. in cash terms. It has been suggested that the increase will be swallowed up by price rises between now and 1st October. That is nonsense. That can happen only if the militants and others go on strike, and if hon. Members on the Labour benches, such as the right lion. Member for Bristol, South-East (Mr. Benn), aid and abet them. If they were to take control and to succeed in breaching the Government's counter-inflation policy, only then would there be any possibility of that happening. As we are, as we have said, absolutely determined that there shall be no breach, pensioners can be assured that their increase represents a very substantial increase in real terms—in other words, a real improvement in the standard of living for the elderly.
Whatever may be said in the House, there is one group of people who know full well that this Government are serving the pensioners far better than the Labour Party would. That is the pensioners

themselves—because they remember so well how they were hit time and time again by the deliberate policies of right hon. and hon. Members opposite by increases in purchase tax and how their plea for annual increases was turned down by the Labour Government.
I was very pleased that my hon. Friend the Member for Surrey, East (Mr. William Clark) who is the Chairman of the Select Committee which is looking into the tax credit scheme, approved of the statement I made in the Budget Statement about child credits.
Several hon. Members, in particular the right hon. Member for Birmingham, Stechford, raised the question of family allowances and the low paid. Quite apart from administrative considerations, only about one-tenth of the gross cost of a simple increase in, or extension of, family allowances would go to helm the least well off—those with incomes below the tax threshold. The cost of an increase sufficient to be of substantial benefit to the non-taxpayer would, on this basis, be prohibitive.
Therefore, there are some hon. Members, such as the hon. Member for Heywood and Royton, who have suggested that the alternative is to provide an increase in family allowances with clawback. If the benefit were clawed back from all except the poorest, as was done by the last Labour Government, that would mean in effect reducing child tax allowances, and so large numbers of the low paid would be brought back into tax.
Moreover, any increase over 50p could mean that the bigger the family the lower the point at which the breadwinner started to pay tax. An increase of £1 weekly in family allowances with full clawback would involve reducing the earnings threshold of a two-child family from £20·56 to £17·23 and that for the three-child family from £22·23 to £15·57.
The right hon. Member for Leeds, East said that the real crime, as he called it, of the Budget was to refuse to raise the tax threshold. I found it somewhat surprising to find the right hon. Gentleman also complaining bitterly that there was no increase in family allowances which would do just the reverse of what he wants.
Anyway, who is the right hon. Gentleman to pose as the advocate of raising the tax threshold? I gave the figures in the Budget Statement. Under this Government the threshold has been raised, and raised in real terms. Under the Labour Government it was lowered, and lowered in real terms. The House is entitled to be treated to a little less hypocrisy.
Instead of purchase tax at various rates, as they were two years ago, of up to 55 per cent., and instead of the selective discriminatory employment tax, on 1st April we shall have value added tax at 10 per cent., the lowest rate in Europe.
The burden of the tax will be £900 million less than if we had just gone on with the old rates of purchase tax and SET which we inherited, which Labour Members appeared quite willing to do. Furthermore, deliberately in order to help the poor and the pensioners, we have now excluded broad areas of expenditure. I shall not go over the details again. Suffice it to say that when this tax comes into existence some of the points which were being made by right hon. and hon. Members of the Opposition will be shown to be wholly without foundation.
When I opened my Budget Statement I said that the twin theme of our strategy was expansion and the attack on inflation. In that statement I set out in some detail the measures we are taking to counter-inflation and how the Budget proposals are related to them. My hon. Friend the Member for Wycombe (Mr. John Hall) had something to say about the policy on prices and pay, and I agree with him. Last Wednesday the right hon. Member for Devon, North (Mr. Thorpe) said:
Every time there is a wage demand, however high, however unreasonable, however inflationary, automatically the Labour Front Bench, provided that it is in Opposition will back it."—[OFFICIAL REPORT, 7th March 1973; Vol. 852, c. 473.]
He was absolutely right. What is more, the country knows that it is so.
One of the most remarkable features of the whole debate has been to see the Opposition Front Bench solemnly coming to the Dispatch Box to criticise us, on the Government benches, for the level of Government expenditure. They seem to be totally unaware of their official policy in a document published last summer which contains this statement:

From the very start, a commitment to increase the share of national resources devoted to the public sector has been central to all our thinking.
They try to make out that they would finance their extra expenditure by increasing the taxation of the rich. But
it would be intellectually dishonest and, in the long run, politically disastrous to pretend that increased taxation of the rich can solve the problem altogether.
Two years ago, if the State had taken all incomes of more than £5,000 a year, the additional revenue at the Chancellor's disposal would have amounted to only about 1 per cent. of Inland Revenue receipts"—
[Interruption.] There is no need to send for Sir Stafford Cripps. Those are the words of the right hon. Member for Stechford.
So inevitably the Opposition's policy would mean in the future, as in the past, higher taxation for everyone—as in the past, higher taxation for everyone on incomes, on expenditure, and on rich and poor alike. Do they think that in those circumstances they could reach a voluntary agreement with the trade unions to limit pay increases? I just do not believe that it is possible.
The choice before the House tonight is this: a determination to control inflation by limiting both pay and prices, or the policy of the Labour Party, so vehemently expounded this afternoon by the right hon. Member for Bristol, South-East to let pay rip. The choice is between the present Government's policy of expansion or the return to a policy of high taxation, of restriction and of stagnation, which is the hallmark of Socialism. That is the choice, and those who vote with the Government tonight will be voting for responsibility and for prosperity.

Question put and agreed to.

Resolved,
That is it expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance; but this Resolution does not extend to the making of amendments with respect to value added tax so as to provide—

(a) for zero-rating or exempting any supply;
(b) for refunding any amount of tax;
(c) for varying the rate of that tax otherwise than in relation to all supplies and importations; or


(d) for any relief other than relief applicable to goods of whatever description or services of whatever description.

Mr. Speaker: I am now required under Standing Order No. 94(2) to put successively, without further debate, the Question on each of the remaining 24 Ways and Means motions, on the three procedure motions and on the motion relating to Finance [Money], on all of which the Finance Bill is to be brought in.
Instead of reading out each motion in extenso, I propose to follow the procedure used in recent years, that is to say, first to state the title of the motion and then simply to put the Question "That the motion be agreed to".

TABLE: SPIRITS OTHER THAN IMPORTED PERFUMED SPIRITS





Customs rates


Description of spirits
Excise rate
Full
Commonwealth and Convention
EEC




£
£
£
£


1. British spirits (per proof gallon)
…
15·4500
—
—
—


2. Imported spirits other than perfumed spirits—







(a) not comprised below in this paragraph (per proof gallon)
…
—
15·5125
15·4500
15·5125


(b) liqueurs, cordials, mixtures and other preparations in bottle, entered in such manner as to indicate that the strength is not to be tested (per gallon)
…
—
20·9450
20·8575
20·9450


(c) ethyl alcohol or neutral spirits, undenatured, of a strength of 140 degrees proof or higher; denatured spirits (including ethyl alcohol and neutral spirits) of any strength (per proof gallon)
…
—
15·5750
15·4500
15·5500


(d) rum (per proof gallon)
…
—
15·5750
15·4500
15·5500




each of the above rates of duty being, in the case of spirits not warehoused or warehoused for less than three years, increased by £0·075 per proof gallon or, for spirits within paragraph 2(b) of this Table, by £0·10 per gallon.

In the Table above 'Commonwealth' indicates good qualifying for Commonwealth preference 'Convention' indicates goods originating in a country which at the end of 1972

2. SURCHARGES AND REBATES IN RESPECT OF REVENUE DUTIES

Motion made, and Question,
That the period after which orders under section 9 of the Finance Act 1961 may not be made or continue in force shall be extended until the end of August 1974.—[Mr. Barber.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

3. SPIRITS (CUSTOMS AND EXCISE)

Motion made, and Question,
That, as from 1st April 1973, the duties of customs and excise chargeable on spirits other than imported perfumed spirits shall be charged at the rates shown in the Table below instead of at the rates shown in Table 1 in Schedule 1 to the Finance Act 1964 as substituted by section 56(2) of the Finance Act 1972, the lower rate applying where two rates would otherwise be applicable.
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

was part of the Convention area within the meaning of the European Free Trade Association Act 1960, 'EEC' indicates goods originating or in free circulation in a State


which is a member of the European Economic Community and 'Full' indicates other goods.—[Mr. Barber.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

4. BEER (CUSTOMS AND EXCISE)

Motion made, and Question,
That—
(a) as from 1st April 1973, the duties of customs and excise chargeable on beer shall be charged at the rates shown in the Table

TABLE: BEER







Customs rates (per 36 gallons)






Excise rates (per 36 gallons)
Full
Commonwealth and Convention
EEC






£
£
£
£


1. Duty
…
…
…
6·90
7·90
6·90
7·70


2. Drawback
…
…
6·90
7·90
6·90
7·70






each of the above rates of duty and drawback being, in the case of beer of an original gravity exceeding 1,030 degrees, increased by £0·29 for each additional degree.


As respects beer the worts whereof before fermentation were of a specific were of a specific gravity a less than 1,030 degrees the amount of drawback allowable shall not exceed the amount of the customs or excise duty shown to the satisfaction of the Commissioners to have been paid.

In the Table above 'Commonwealth' indicates goods qualifying for Commonwealth preference, 'Convention' indicates goods originating in a country which at the end of 1972 was part of the Convention area within the meaning of the European Free Trade Association Act 1960, 'EEC' indicates goods originating or in

below instead of at the rates shown in Schedule 2 to the Finance Act 1964 as substituted by section 1(2) of the Finance Act 1969, the lower rate applying where two rates would otherwise be applicable;

(b) as respects beer on which there have been paid duties of customs or excise at the rates shown in the Table below drawback shall be allowed at the rates shown in that Table instead of at the rates shown in the said Schedule 2.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the -provisions of the Provisional Collection of Taxes Act 1968.

free circulation in a State which is a member of the European Economic Community and 'Full' indicates other goods.—[Mr. Barber.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

5. WINE (CUSTOMS)

Motion made, and Question,
That, as from 1st April 1973, the duties of customs chargeable on wine including the less of wine) shall, instead of being charged at the rates shown in Schedule 3 to the Finance Act 1964 as substituted by section 1(2) of the Finance Act 1969, be charged at the rates shown in the Table below, the lower or lowest rate applying where more than one rate would

TABLE: WINE




Rates of duty (per gallon)







EEC


Description of Wine
Full
Commonwealth
Republic of Ireland
1st April 1973
1st July 1973




£
£
£
£
£


Light wine:—








Still—








not in bottle
…
0·875
0·775
0·750
0·875
0·850


in bottle
…
1·000
0·850
0·750
1·000
0·950


Sparkling
…
1·500
1·400
1·050
1·500
1·480


Other wine not exceeding 32 degrees of proof spirit:—








Still—








not in bottle
…
1·975
1·475
1·000
1·975
1·875


in bottle
…
2·100
1·550
1·000
2·100
1·975


Sparkling
…
2·600
2·100
1·300
2·600
2·500


Wine exceeding 32 degrees of proof spirit:—








Still—








not in bottle
…
1·975
1·475
1·475
1·975
1·875


in bottle
…
2·100
1·550
1·475
2·100
1·975


Sparkling
…
2·600
2·100
2·100
2·600
2·500


together, in the case of wine exceeding 42 degrees of proof spirit, with an addition for each additional degree or fraction of a degree of
…
0·160
0·120
0·120
0·160
0·152

The rates shown under the heading 1st July 1973 replace as from that date the rates applicable to the following goods originating in Austria, Liechtenstein, Portugal (with the Azores and Maderia), Sweden or Switzerland, namely vermouths and other wines of fresh grapes flavoured with aromatic extracts.

In the Table above—

(a) "Commonwealth" indicates goods qualifying for Commonwealth preference, 'Republic of Ireland' indicates goods of the Republic of Ireland consigned to the United Kingdom from that country, 'EEC' indicates

otherwise be applicable, and any rate shown under the heading 1st July 1973 replacing as from that date the corresponding rate in force before that date; and those duties shall in the case of light wine which qualifies for Commonwealth preference be subject to section 3(3) of the Finance Act 1964.

And it is hereby that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

goods originating or in free circulation in a State which is a member of the European Economic Community and 'Full' indicates other goods;

(b)'light wine' means wine not exceeding 25 degrees or, in the case of wine qualifying for Commonwealth preference, 27 degrees of proof spirit [Mr. Barber.]

put forthwith pursuant to Standing Order No 94 (Ways and Means motions), and agreed to.

6. BRITISH WINE (EXCISE)

Motion made, and Question,
That, as from 1st April 1973, the duties of excise chargeable on British wine shall be charged at the rates shown in the Table below

TABLE: BRITISH WINE


Description of British wine
Rates of duty (per gallon)












£


Light British wine:—












Still
…
…
…
…
…
…
…
…
…
0·75


Sparkling
…
…
…
…
…
…
…
…
1·05


Other British wine:—












Still
…
…
…
…
…
…
…
…
…
1·00


Sparkling
…
…
…
…
…
…
…
…
1·30


In the Table above, 'light British wine' means British wine not exceeding 27 degrees of proof spirit.—[Mr. Barber.]

Put forthwith pursuant to Standing Order No 94 (Ways and Means motions), and agreed to.

7. TOBACCO (CUSTOMS AND EXCISE)

Motion made, and Question,

That—

(a)as from 1st April 1973, the duties of customs and excise chargeable on tobacco, shall, instead of being charged at the rates shown in Tables 1 and 2 in Schedule 5 to the Finance Act 1964 as substituted by section 1(2) of the Finance Act 1969, be charged at the rates shown in Tables 1 and 2 below, the lower or lowest rate applying where

instead of at the rates shown in Schedule 4 to the Finance Act 1964 as substituted by section 1(2) of the Finance Act 1969.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

More than one rate would otherwise be applicable, and any rate shown under the heading 1st July 1973 replacing as from that date the corresponding rate in force before that date;

(b) as respects tobacco on which there have been paid duties of customs or excise at the rates shown in Tables 1 and 2 below, drawback shall be allowed at the appropriate rate shown in Table 3 below instead of at the rates shown in Table 3 in the said Schedule 5.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

TABLE 1: TOBACCO (RATES OF CUSTOMS DUTIES)



Rates of duty per pound







EEC


Description of tobacco
Full
Commonwealth
Convention
Republic of Ireland
1st April 1973
1st July 1973



£
£
£
£
£
£


1 Unmanufactured:








Containing 10 per cent. or more by weight of moisture
4·3050
4·2280
4·3050
4·2280
4·3050
4·2880


Other
4·3550
4·2700
4·3550
4·2700
4·3550
4·3362


2. Manufactured, viz.:








Cigars
4·7490
4·6015
4·6015
4·6015
4·7195
4·7195


Cigarettes
4·5800
4·4615
4·3615
4·3615
4·5363
4·5363


Cavendish or negrohead: Manufactured in bond
4·4300
4·3325
4·4300
4·3325
4·4105
4·4105


Other
4·5300
4·4180
4·4180
4·4180
4·5076
4·5076


Other
4·4425
4·3450
4·3050
4·3050
4·4150
4·4150


3. Snuff and snuff work (including tobacco dust or powder and ground tobacco)
4·4680
4·3660
4·3550
4·3550
4·4454
4·4454

TABLE 2: TOBACCO (RATES OF EXCISE DUTIES)


Description of tobacco
Rates of duty per pound






£


1. Unmanufactured:





Containing 10 per cent, or more by weight of moisture
…
…
4·2200


Other
…
…
…
4·2610


2 Manufactured:






Cavendish or negrohead manufactured in bond
…
…
…
4·3325

TABLE 3: TOBACCO (RATES OF DRAWBACK)



Rates of drawback (per pound)


Description of tobacco
In respect of tobacco on which customs duty at the full or Convention rate has been paid
In respect of tobacco on which customs duty at the Commonwealth or Republic of Ireland rate or excise duty has been paid
In respect of tobacco on which customs duty at the EEC rate in force on 1st April 1973 has been paid
In respect of tobacco on which customs duty at the EEC rate in force on 1st July 1973 has been paid



£
£
£
£


Cigars
4·5220
4·4450
4·5220
4·5066


Cigarettes
4·3550
4·2780
4·3550
4·3396


Cut, roll, cake or other manufactured tobacco
4·3430
4·2660
4·3430
4·3276


Snuff (not being offal snuff)
4·3680
4·2910
4·3680
4·3526


Stalks and tobacco refuse
4·3180
4·2410
4·3180
4·3026

In the Tables above 'Commonwealth' indicates goods qualifying for Commonwealth preference, 'Convention' indicates goods originating in a country which at the end of 1972 was part of the Convention area within the meaning of the European Tree Trade Association Act 1960, 'Republic of Ireland' indicates goods of the Republic of Ireland consigned to the United Kingdom from that country, 'EEC' indicates goods originating or in free circulation in a State which is a member of the European Economic Community and 'Full' indicates other goods.—[Mr. Barber.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

8. MATCHES (CUSTOMS AND EXCISE)

Motion made, and Question,
That, in lieu of the duties of customs and excise charged on matches under section 4 of the Finance Act 1951, there shall as from 1st April 1973 be charged at the rates shown in the Table below, the lower rate applying where two rates would otherwise be applicable,—

(a) a duty of customs on matches imported into the United Kingdom, and
(b) a duty of excise on matches sent out from the premises of a manufacturer.
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

TABLE: MATCHES








Customs rates







Excise rate
Full
Convention and Republic of Ireland
EEC







£
£
£
£


For every 7,200 matches (and so in proportion for any less number of matches)
…
…
…
…
0·4900
0·5225
0·4900
0·5160

In the Table above 'Convention' indicates goods originating in a country which at the end of 1972 was part of the Convention area within the meaning of the European Free Trade Association Act 1960. 'Republic of Ireland' indicates goods of the Republic of Ireland consigned to the United Kingdom from that country, 'EEC' indicates goods originating or in free circulation in a State which is a member of the European Economic Community and 'Full' indicates other goods.—[Mr. Barber.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

TABLE: MECHANICAL LIGHTERS (OTHER THAN GAS LIGHTERS)



Customs rates (per lighter)


Excise rate (per lighter)
Full
Convention and Republic of Ireland


£
£
£


0·2000
0·2250
0·2000

In the Table above 'Convention' indicates goods originating in a country which at the end of 1972 was part of the Convention area within the meaning of the European Free Trade Association Act 1960, 'Republic of Ireland' indicates goods of the Republic of Ireland consigned to the United Kingdom from that

9. MECHANICAL LIGHTERS (CUSTOMS AND EXCISE)

Motion made, and Question,
That, as from 1st April 1973, the duties of customs and excise charged on mechanical lighters by section 6 of the Finance Act 1928 shall, instead of being charged at the rates specified in section 8 of the Finance Act 1949 and section 56(3) of the Finance Act 1972, be charged at the rates shown in the Table below; but no duty shall be chargeable under section 6 of the Act of 1928 on a gas lighter, that is to say a mechanical lighter which is shown to the satisfaction of the Commissioner of Customs and Excise to be constructed solely for the purpose of igniting gas for domestic use.
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

country and 'Full' indicates other goods.—[Mr. Barber.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

10. REVENUE DUTIES (ALTERATION IN PURSUANCE OF INTERNATIONAL OBLIGATIONS).

Motion made, and Question,
That provision may be made for making such alterations in the rates or incidence of duties of customs and of drawbacks and other reliefs or in the nature of any relief as may be required to give effect to Community obligations or certain other international obligations of the United Kingdom and such further alterations as may he necessary to avoid inconvenient rates.—[Mr. Barber.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

11. VALUE ADDED TAX (RELIEF FOR TAX-OR DUTY-PAID STOCK)

Motion made, and Question,
That the provisions set out below shall have effect.
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.
(1) Where the Commissioners of Customs and Excise are satisfied that purchase tax or a duty specified in paragraph (7) below was charged on or in respect of goods or on or in respect of parts or ingredients of goods which at the beginning of April 1973 were unused and held by a taxable person for sale in the course of his business, then if—

(a) before the end of April 1973 the Commissioners were notified, in the manner required by the notice published by them as Notice No. 748, of the particulars so required; and
(b) the other conditions mentioned in that Notice are satisfied;
an amount determined or arrived at in accordance with paragraph (2) below to take account of the tax or duty charged may, in the manner specified in the Notice, be included in the return made by the taxable person under Part I of the Finance Act 1972 for the first prescribed accounting period and shall, if so included, be treated for the purposes of that Part as an amount to be deducted as input tax.

In this paragraph 'sale' includes any supply under a hire-purchase agreement.

(2) The amount that may be so included shall be as follows—

(a) if it is to take account of purchase tax, then, subject to sub-paragraphs (b) and (c) below, it shall be the amount charged;
(b) if purchase tax was charged at a higher rate than the corresponding rate in force

on 7th November 1972 the amount shall be what the amount charged would have been had purchase tax been charged at the corresponding rate;
(c) if purchase tax was charged in respect of a vehicle which, had purchase tax not been chargeable, would be a chargeable vehicle for the purposes of the car tax, the amount shall be three-fifths of the amount arrived at under sub-paragraphs (a) and (b) above;
(d) if the amount is to take account of a duty specified in paragraph (7) below, then, subject to paragraph (5) and sub-paragraph (e) below, it shall be the excess of the amount charged over what it would have been had duty been charged at the corresponding rate in force on 1st April 1973;
(e) if the duty was charged at a rate other than the corresponding rate in force on 7th November 1972 then, subject to paragraph (5) below, the amount shall be the excess of the amount that would have been charged at that corresponding rate over the amount that would have been charged at the corresponding rate in force on 1st April 1973;
and such method may be used in determining that amount, or, if it cannot be determined, in arriving at an appropriate amount to be substituted for it, as the Commissioners may allow.

(3) Where by virtue of this provision an amount is treated as input tax to take account of a duty charged, then, if any drawback or repayment falls to be allowed or made in respect of that duty its amount shall be calculated as if the duty had been charged at the corresponding rate in force on 1st April 1973.

(4) For the purposes of paragraphs (2)(d), (2)(e) and (3) above any country's membership of the European Economic Community shall be disregarded.

(5) In relation to duty charged on a gas lighter, the rates in force on 1st April 1973 shall be taken, for the purposes of paragraphs (2)(d) and (2)(e) and (3) above, to be

(a) Convention, Republic of Ireland or excise, 10p per lighter,
(b) other rates, 12½p per lighter.

(6) For the purposes of this provision goods shall be deemed to be held by a person at the beginning of April 1973 if, and only if, they were—

(a) produced by or supplied to him in the United Kingdom; or
(b) imported by him;
before the end of March 1973 and had not then been supplied by him; and any question whether goods were supplied by or to or were imported by any person before the end of March 1973 shall be determined as, under sections 7 and 47 of the Finance Act 1972, it falls to be determined for the purposes of the charge to value added tax.

(7) The duties referred to in paragraph (1) above are any duty of customs or excise charged on—

(a) spirits other than imported perfumed spirits;
(b) beer;
(c) wine;
(d) British wine;
(e) tobacco;
(f) matches; or
(g) mechanical lighters.—[Mr. Barber.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

12. VALUE ADDED TAX (TIME OF SUPPLY)

Motion made, and Question,
That section 7(5) of the Finance Act 1972 shall be amended by substituting for the words '(notwithstanding the preceding provisions of this section)' the words '(to the extent that it is not treated as taking place at the time mentioned in subsection (4) of this section)'.
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Barber.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

13. CAR TAX (EXPORTED VEHICLES)

Motion made, and Question,

That at the end of paragraph 7 of Schedule 7 to the Finance Act 1972 there shall be added

the words 'but where such a vehicle is imported after having been exported the provisions of section 52 of this Act and of this Schedule shall apply in relation to it as they apply in relation to a vehicle made outside the United Kingdom and not previously imported'.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Barber.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

14. INCOME TAX (SURTAX RATES FOR 1972–73)

Motion made, and Question,
That—

(a) income tax for the year 1972–73 shall be charged, in the case of an individual whose total income exceeded £3,000, at the same higher rates in respect of the excess of that income over £2,000 as were charged for the year 1971–72;
(b) an individual whose total income did not exceed £3,500 shall be entitled to have the surtax chargeable by virtue of paragraph (a) above reduced to an amount equal to 40 per cent. of the difference between his total income and £3,000.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Barber.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions):—

The House divided: Ayes 288, Noes 266.

Division No. 80.]
AYES
[10.1 p.m.


Adley, Robert
Brinton, Sir Tatton
Costain, A. P.


Alison, Michael (Barkston Ash)
Brocklebank-Fowler, Christopher
Crouch, David


Allason, James (Hemel Hempstead)
Brown, Sir Edward (Bath)
Crowder, F. P.


Amery, Rt. Hn. Julian
Bruce-Gardyne, J.
d'Avigdor-Goldsmid, Sir Henry


Archer, Jeffrey (Louth)
Bryan, Sir Paul
Dean, Paul


Astor, John
Buchanan-Smith, Alick (Angus, N&amp;M)
Deedes, Rt. Hn. W. F.


Atkins, Humphrey
Buck, Antony
Digby, Simon Wingfield


Awdry, Daniel
Bullus, Sir Eric
Dixon, Piers


Baker, Kenneth (St. Marylebone)
Burden, F. A.
Douglas-Home, Rt. Hn. Sir Alec


Barber, Rt. Hn. Anthony
Butler, Adam (Bosworth)
Drayson, G. B.


Batsford, Brian
Campbell, Rt. Hn. G. (Moray &amp; Nairn)
du Cann, Rt. Hn. Edward


Bell, Ronald
Carlisle, Mark
Dykes, Hugh


Bennett, Sir Frederic (Torquay)
Cary, Sir Robert
Eden, Rt. Hn. Sir John


Bennett, Dr. Reginald (Gosport)
Chapman, Sydney
Edwards, Nicholas (Pembroke)


Benyon, W.
Chataway, Rt. Hn. Christopher
Elliot, Capt. Walter (Carshalton)


Berry, Hn. Anthony
Chichester-Clark, R.
Elliott, R. W. (N'c'tle-upon-Tyne, N.)


Biffen, John
Churchill, W. S.
Emery, Peter


Biggs-Davison, John
Clark, William (Surrey, E.)
Eyre, Reginald


Blaker, Peter
Clarke, Kenneth (Rushcliffe)
Fell, Anthony


Boardman, Tom (Leicester, S.W.)
Cockeram, Eric
Fenner, Mrs. Peggy


Body, Richard
Cooke, Robert
Fidler, Michael


Boscawen, Hn. Robert
Coombs, Derek
Fisher, Nigel (Surbiton)


Bossom, Sir Clive
Cooper, A. E.
Fletcher-Cooke, Charles


Bowden, Andrew
Cordle, John
Fookes, Miss Janet


Braine, Sir Bernard
Corfield, Rt. Hn. Sir Frederick
Fortescue, Tim


Bray, Ronald
Cormack, Patrick
Foster, Sir John




Fowler, Norman
Le Marchant, Spencer
Ridley, Hn. Nicholas


Fox, Marcus
Lewis, Kenneth (Rutland)
Ridsdale, Julian


Fraser, Rt. Hn. Hugh (St'fford &amp; Stone)
Lloyd, Rt. Hn. Geoffrey (Sut'nC'field)
Rippon, Rt. Hn. Geoffrey


Fry, Peter
Lloyd, Ian (P'tsm'th, Langstone)
Roberts, Michael (Cardiff, N.)


Galbraith, Hn. T. G. D.
Longden, Sir Gilbert
Roberts, Wyn (Conway)


Gardner, Edward
Loveridge, John
Rossi, Hugh (Hornsey)


Gibson-Watt, David
McAdden, Sir Stephen
Rost, Peter


Gilmour, Ian (Norfolk, C.)
MacArthur, Ian
Royle, Anthony


Gilmour, Sir John (Fife, E.)
McCrindle, R. A.
Russell, Sir Ronald


Glyn, Dr. Alan
McLaren, Martin
St. John-Stevas, Norman


Goodhart, Philip
Maclean, Sir Fitzroy
Scott, Nicholas


Goodhew, Victor
McMaster, Stanley
Shaw, Michael (Sc'b'gh &amp; Whitby)


Gorst, John
Macmillan, Rt. Hn. Maurice (Farnham)
Shelton, William (Clapham)


Gower, Raymond
McNair-Wilson, Michael
Shersby, Michael


Grant, Anthony (Harrow, C.)
McNair-Wilson, Patrick (New Forest)
Simeons, Charles


Gray, Hamish
Maddan, Martin
Sinclair, Sir George


Green, Alan
Madel, David
Skeet, T. H. H.


Griffiths, Eldon (Bury St. Edmunds)
Maginnis, John E.
Smith, Dudley (W'wick &amp; L'mington)


Grylls, Michael
Marples, Rt. Hn. Ernest
Soref, Harold


Gummer, J. Selwyn
Marten, Neil
Speed, Keith


Gurden, Harold
Mather, Carol
Spence, John


Hall, Miss Joan (Keighley)
Maude, Angus
Sproat, Iain


Hall, John (Wycombe)
Maudling, Rt. Hn. Reginald
Stainton, Keith


Hall-Davis, A. G. F.
Mawby, Ray
Stanbrook, Ivor


Hamilton, Michael (Salisbury)
Maxwell-Hyslop, R. J.
Stewart-Smith, Geoffrey (Belper)


Hannam, John (Exeter)
Meyer, Sir Anthony
Stodart, Anthony (Edinburgh W.)


Harrison, Brian (Maldon)
Mills, Peter (Torrington)
Stoddart-Scott Col. Sir M


Haselhurst, Alan
Mills, Stratton (Belfast, N.)
Stokes, John


Hastings, Stephen
Miscampbell, Norman
Stuttaford, Dr. Tom


Havers, Michael
Mitchell, Lt.-Col. C.(Aberdeenshire, W)
Sutcliffe, John


Hawkins, Paul
Mitchell, David (Basingstoke)
Tapsell, Peter


Hay, John




Hayhoe, Barney
Moate, Roger
Taylor, Sir Charles (Eastbourne)


Heath, Rt. Hn. Edward
Money, Ernie
Taylor, Edward M.(G'gow, Cathcart)


Heseltine, Michael
Monks, Mrs. Connie
Taylor, Frank (Moss Side)


Hicks, Robert
Monro, Hector
Taylor, Robert (Croydon, N.W.)


Higgins, Terence L.
Montgomery, Fergus
Tebbit, Norman


Hiley, Joseph
More, Jasper
Temple, John M.


Holland, Philip
Morgan, Elystan (Cardiganshire)
Thatcher, Rt. Hn. Mrs. Margaret


Holt, Miss Mary
Morgan-Giles, Rear-Adm.
Thomas, John Stradling (Monmouth)


Hordern, Peter
Morrison, Charles
Thomas, Rt. Hn. Peter (Hendon. S.)


Hornby, Richard
Mudd, David
Thompson, Sir Richard (Croydon. S.)


Hornsby-Smith, Rt. Hn. Dame Patricia
Murton, Oscar
Trafford, Dr. Anthony


Howe, Hn. Sir Geoffrey (Reigate)
Nabarro, Sir Gerald
Trew, Peter


Howell, David (Guildford)
Neave, Airey
Tugendhat, Christopher


Howell, Ralph (Norfolk, N.)
Nicholls, Sir Harmar
Turton, Rt. Hn. Sir Robin


Hunt, John
Noble, Rt. Hn. Michael
van Straubenzee, W. R.


Hutchison, Michael Clark
Nott, John
Vaughan, Dr. Gerard


Iremonger, T. L,
Onslow, Cranley
Vickers, Dame Joan


Irvine, Bryant Godman (Rye)
Oppenheim, Mrs. Sally
Waddington, David


James, David
Owen, Idris (Stockport, N.)
Walder, David (Clitheroe)


Jenkin, Patrick (Woodford)
Page, Rt. Hn. Graham (Crosby)
Walker, Rt. Hn. Peter (Worcester)


Jennings, J. C. (Burton)
Page, John (Harrow, W.)
Wall, Patrick


Jessel, Toby
Parkinson, Cecil
Walters, Dennis


Jones, Arthur (Northants, S.)
Percival, Ian
Ward, Dame Irene


Jopling, Michael
Peyton, Rt. Hn. John
Warren, Kenneth


Joseph, Rt. Hn. Sir Keith
Pike, Miss Mervyn
Wells, John (Maidstone)


Kaberry, Sir Donald
Pink, R. Bonner
White, Roger (Gravesend)


Kellett-Bowman, Mrs. Elaine
Powell, Rt. Hn. J. Enoch
Wiggin, Jerry


Kershaw, Anthony
Price, David (Eastleigh)
Wilkinson, John


Kilfedder, James
Prior, Rt. Hn. J. M. L.
Winterton, Nicholas


Kimball, Marcus
Proudfoot, Wilfred
Wolrige-Gordon, Patrick


King, Evelyn (Dorset, S.)
Pym, Rt. Hn. Francis
Wood, Rt. Hn. Richard


King, Tom (Bridgwater)
Quennell, Miss J. M.
Woodhouse, Hn. Christopher


Kinsey, J. R.
Ralson, Timothy
Woodnutt, Mark


Kitson, Timothy
Ramsden, Rt. Hn. James
Worsley, Marcus


Knight, Mrs. Jill
Rawlinson, Rt. Hn. Sir Peter
Wylie, Rt. Hn. N. R.


Knox, David
Redmond, Robert
Younger, Hn. George


Lambton, Lord
Reed, Laurance (Bolton, E.)
TELLERS FOR THE AYES


Lamont, Norman
Rees, Peter (Dover)
Mr. Walter Clegg and


Lane, David
Rees-Davies, W. R.
Mr. Bernard Weatherill


Langford-Holt, Sir John
Renton, Rt. Hn. Sir David





NOES


Abse, Leo
Barnett, Joel (Heywood and Royton)
Bottomley, Rt. Hn. Arthur


Allaun, Frank (Salford, E.)
Baxter, William
Bradley, Tom


Archer, Peter (Rowley Regis)
Beaney, Alan
Broughton, Sir Alfred


Armstrong, Ernest
Benn, Rt. Hn. Anthony Wedgwood
Brown, Robert C. (N'c'tle-u-Tyne, W.)


Ashley, Jack
Bennett, James(Glasgow, Bridgeton)
Brown, Hugh D. (G'gow, Provan)


Ashton, Joe
Bidwell, Sydney
Brown, Ronald(Shoreditch &amp; F'bury)


Atkinson, Norman
Bishop, E. S.
Buchan, Norman


Bagier, Gordon A. T.
Blenkinsop, Arthur
Buchanan, Richard (G'gow, Sp'burn)


Barnes, Michael
Boardman, H. (Leigh)
Butler, Mrs. Joyce (Wood Green)


Barnett, Guy (Greenwich)
Booth, Albert
Callaghan, Rt. Hn. James







Campbell, I. (Dunbartonshire, W.)
Hughes, Mark (Durham)
Pannell, Rt. Hn. Charles


Cent, R. B.
Hughes, Robert (Aberdeen, N.)
Pardoe, John


Carmichael, Neil
Hughes, Roy (Newport)
Parker John (Dagenham)


Carter, Ray (Birmingh'm, Northfield)
Hunter, Adam
Parry, Robert (Liverpool, Exchange)


Carter-Jones, Lewis (Eccles)
Irvine, Rt. Hn. Sir Arthur (Edge Hill)
Pavitt, Laurie


Castle, Rt. Hn. Barbara
Janner, Greville
Peart, Rt. Hn. Fred


Clark, David (Colne Valley)
Jay, Rt. Hn. Douglas
Pendry, Tom


Cocks, Michael (Bristol, S.)
Jeger, Mrs. Lena
Perry, Ernest G.


Cohen, Stanley
Jenkins, Hugh (Putney)
Prentice, Rt. Hn. Reg.


Concannon, J. D.
Jenkins, Rt. Hn. Roy (Stechford)
Prescott, John


Corbet, Mrs. Freda
John, Brynmor
Price, William (Rugby)


Cox, Thomas (Wandsworth, C.)
Johnson, James (K'ston-on-Hull, W.)
Probert, Arthur


Crawshaw, Richard
Johnson, Walter (Derby, S.)
Radice, Giles


Cronin, John
Jones, Barry (Flint, E.)
Rankin, John


Crosland, Rt. Hn. Anthony
Jones, Dan (Burnley)
Reed, D. (Sedgefield)


Crossman, Rt. Hn. Richard
Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)
Rees, Merlyn (Leeds, S.)


Cunningham, G. (Islington, S.W.)
Jones, Gwynoro (Carmarthen)
Rhodes, Geoffrey


Cunningham, Dr. J. A. (Whitehaven)
Jones, T. Alec (Rhondda, W.)
Richard, Ivor


Dalyell, Tam
Kaufman, Gerald
Roberts, Albert (Normanton)


Darling, Rt. Hn. George
Kelley, Richard
Roberts, Rt. Hn. Goronwy (Caernarvon)


Davidson, Arthur
Kerr, Russell
Robertson, John (Paisley)


Davies, Denzil (Llanelly)
Kinnock, Neil
Roderick, Caerwyn E. (Brc'n&amp;R'dnor)


Davis, Clinton (Hackney, C.)
Lambie, David
Rodgers, William (Stockton-on-Tees)


Davis, Terry (Bromsgrove)
Lamborn, Harry
Roper, John


de Freitas, Rt. Hn. Sir Geoffrey
Lamond, James
Rose, Paul B.


Deakins, Eric
Latham, Arthur
Ross, Rt. Hn. William (Kilmarnock)


Delargy, Hugh
Lawson, George
Sheldon, Robert (Ashton-under-Lyne)


Dell, Rt. Hn. Edmund
Leadbitter, Ted
Shore, Rt. Hn. Peter (Stepney)


Doig, Peter
Lee, Rt. Hn. Frederick
Short, Rt. Hn. Edward (N'c'tle-u-Tyne)


Dormand, J. D.
Leonard, Dick
Short, Mrs. Renée (W'hampton, N.E.)


Douglas, Dick (Stirlingshire, E.)
Lestor, Miss Joan
Silkin, Rt. Hn. John (Deptford)


Douglas-Mann, Bruce
Lewis, Arthur (W. Ham, N.)
Silkin, Hn. S. C. (Dulwich)


Driberg, Tom
Lewis, Ron (Carlisle)
Sillars, James


Duffy, A. E. P.
Lipton, Marcus
Silverman, Julius


Dunnett, Jack
Lomas, Kenneth
Skinner, Dennis


Eadie, Alex
Loughlin, Charles
Smith, John (Lanarkshire, N.)


Edelman, Maurice
Lyon, Alexander W. (York)
Spearing, Nigel


Edwards, Robert (Bilston)
Lyons, Edward (Bradford, E.)
Spriggs, Leslie


Edwards, William (Merioneth)
Mabon, Dr. J. Dickson
Stallard, A. W.


Ellis, Tom
McBride, Neil
Steel, David


English, Michael
McCartney, Hugh
Stoddart, David (Swindon)


Evans, Fred
McElhone, Frank
Stonehouse, Rt. Hn. John


Ewing, Harry
Machin, George
Strang, Gavin


Faulds, Andrew
Mackenzie, Gregor
Strauss, Rt. Hn. G. R.


Fernyhough, Rt. Hn. E.
Mackie, John
Summerskill, Hn. Dr. Shirley


Fitch, Alan (Wigan)
Mackintosh, John P.
Swain, Thomas


Fletcher, Raymond (Ilkeston)
Maclennan, Robert
Taverne, Dick


Fletcher, Ted (Darlington)
McMillan, Tom (Glasgow, C.)
Thomas, Rt. Hn. George (Cardiff, W.)


Foot, Michael
McNamara, J. Kevin
Thomas, Jeffrey (Abertillery)


Ford, Ben
Mahon, Simon (Bootle)
Thorpe, Rt. Hn. Jeremy


Forrester, John
Mallalieu, J. P. W. (Huddersfield, E.)
Tinn, James


Fraser, John (Norwood)
Marks, Kenneth
Tomney, Frank


Galpern, Sir Myer
Marsden, F.
Tope, Graham


Garrett, W. E.
Marshall, Dr. Edmund
Torney, Tom


Ginsburg, David (Dewsbury)
Mayhew, Christopher
Tuck, Raphael


Golding, John
Meacher, Michael
Urwin, T. W.


Gourlay, Harry
Mellish, Rt. Hn. Robert
Varley, Eric G.


Grant, George (Morpeth)
Mendelson, John
Wainwright, Edwin


Grant, John D. (Islington, E.)
Millan, Bruce
Walden, Brian (B'm'ham, All Saints)


Griffiths, Eddie (Brightside)
Miller, Dr. M. S.
Walker, Harold (Doncaster)


Griffiths, Will (Exchange)
Milne, Edward
Wallace, George


Grimond, Rt. Hn. J.
Mitchell, R. C. (S'hampton, Itchen)
Watkins, David


Hamilton, James (Bothwell)
Morgan, Elystan (Cardiganshire)
Weitzman, David


Hamilton, William (Fife, W.)
Morris, Alfred (Wythenshawe)
Wellbeloved, Jamet


Hamling, William
Morris, Charles R. (Openshaw)
Wells, William (Walsall, N.)


Hannan, William (G'gow, Maryhill)
Morris, Rt. Hn. John (Aberavon)
White, James (Glasgow, Pollok)


Hardy, Peter
Moyle, Roland
Whitehead, Phillip


Harper, Joseph
Mulley, Rt. Hn. Frederick
Whitlock, William


Harrison, Walter (Wakefield)
Murray, Ronald King
Willey, Rt. Hn. Frederick


Hart, Rt. Hn. Judith
Oakes, Gordon
Williams, Alan (Swansea, W.)


Hattersley, Roy
Ogden, Eric
Williams, W. T. (Warrington)


Healey, Rt. Hn. Denis
O'Halloran, Michael
Wilson, Alexander (Hamilton)


Heffer, Eric S.
O'Malley, Brian
Wilson, Rt. Hn. Harold (Huyton)


Hilton, W. S.
Oram, Bert
Wilson, William (Coventry, S.)


Hooson, Emlyn
Orbach, Maurice
Woof, Robert


Horam, John




Houghton, Rt. Hn. Douglas
Orme, Stanley
TELLERS FOR THE NOES:


Howell, Denis (Small Heath)
Oswald, Thomas
Mr. Donald Coleman and


Huckfield, Leslie
Padley, Walter
Mr. James A. Dunn.


Hughes, Rt. Hn. Cledwyn (Anglesey)
Palmer, Arthur

Question accordingly agreed to.

15. INCOME TAX (ALTERATION OF PERSONAL RELIEFS)

Motion made, and Question,
That—

(1) in section 7 of the Income and Corporation Taxes Act 1970 (relief for persons over sixty-five with small incomes)—

(a) for the references to £634 and £929 (income limits for exemption) there shall be substituted references to £700 and £1,000, and
(b) for the reference to £245 (excess over those limits beyond which relief by reduction of tax is excluded) there shall be substituted a reference to £340; and

(2) section 16 of the Income and Corporation Taxes Act 1970 (relief in respect of dependent relative) be amended as follows:—
(a) in subsection (1) (relief limited by reference to total income of dependent relative) for the words 'does not exceed £412 a year' there shall be substituted the words does not in a year exceed by more than £100 a sum equal to the basic retirement pension for that year' and for the words from 'deduction' to the end of the subsection there shall be substituted the words 'deduction' from his total income of £100 reduced, if the total income of the person so maintained exceeds the basic retirement pension, by the amount of the excess';
(b) in subsection (2) (modifications of subsection (1) where claimant is a woman) for paragraph (b) there shall be substituted the following paragraph:—
'(b) unless she is a married woman living with her husband, for each reference in that subsection to £100 there shall he substituted a reference to 1945';
(c) at the end of subsection (2) there shall be inserted the following subsection:—
'(2A) For the purposes of this section "the basic retirement pension" for any year means the aggregate of the payments on account of retirement pension under section 30 of the National Insurance Act 1965 to which a person is entitled in that year by virtue of his own insurance if, throughout that year,—
(a) he fulfils the conditions in paragraphs (a) and (b) of subsection (1) of that section; and
(b) none of those payments is reduced under subsection (7) of that section (by reference to his earnings) or increased under any other provision of that Act'; and
(d) in subsection (3) (apportionment of relief where two or more persons jointly maintain a dependent relative) for the words from 'the £100 mentioned' to 'proviso to that subsection' there shall be substituted the words the deduction of £100 or less mentioned in that subsection in respect of the person so maintained';

but this Resolution shall not require any change to be made in the amounts to be deducted or repaid under Section 204 (pay-as-you-earn) of the Income and Corporation Taxes Act 1970 before 4th May 1973.
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Barber.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

16. INCOME TAX (SETTLEMENTS)

Motion made, and Question,
That charges or additional charges to income tax may be imposed on income arising to trustees, sums apportioned to trustees or beneficiaries under Schedule 16 to the Finance Act 1972 or sums treated as income of a settlor; and any provision giving effect to this Resolution may alter the circumstances in which any income falls to be treated as income arising under a settlement.—[Mr. Barber.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

17. INCOME TAX (SHARE OPTION SCHEMES AND SHARE INCENTIVE SCHEMES)

Motion made, and Question,
That charges to income tax (including charges for the year 1972–73) may be imposed in connection with the acquisition by any person, as a director or employee of a body corporate, of shares or an interest in shares or of a right to acquire shares.—[Mr. Barber.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

18. CORPORATION TAX (CHARGE AND RATE FOR FINANCIAL YEAR 1972)

Motion made, and Question,
That corporation tax shall be charged for the financial year 1972 at the rate of 40 per cent.—[Mr. Barber.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

19. CORPORATION TAX (AMENDMENTS)

Motion made, and Question,
That charges to income tax and corporation tax, including charges for past years of assessment and accounting periods, may be imposed by amendments about—

(a) close companies,
(b) the circumstances in which group relief may be claimed,


(c) the surrender of surplus advance coporation tax,
(d) the setting off of losses relating to certain types of contract, and
(e) partnerships involving companies; and amendments requiring the making of claims for the purpose of certain reliefs.—[Mr. Barber.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

20. TAX AVOIDANCE (INCOME TAX AND CORPORATION TAX)

Motion made, and Question,
That charges to income tax and corporation tax may be imposed by—

(a) amendments of Chapters I and II of Part XVII of the Income and Corporation Taxes Act 1970 (tax avoidance),
(b) provisions about qualifying distributions received by persons entitled to any exemption from tax, and
(c) provisions about amounts treated as distributions by virtue of section 234 or 235 of the Income and Corporation Taxes Act 1970 or paragraph 3(3) of Schedule 22 to the Finance Act 1972 (bonus issues, etc.).— [Mr. Barber.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

21. CERTIFICATES OF DEPOSIT (INCOME TAX AND CORPORATION TAX)

Motion made, and Question,
That charges to income tax and corporation tax may be imposed by provisions about transactions in certificates of deposit.—[Mr. Barber.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

22. UNDERWRITERS (INCOME TAX AND CAPITAL GAINS TAX)

Motion made, and Question,
That charges to income tax and capital gains tax (including charges for past years of assessment) may be imposed by new provisions about income and gains of underwriters.—[Mr. Barber]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions). and agreed to.

23. TERRITORIAL SEA AND CONTINENTAL SHELF (INCOME TAX, CORPORATION TAX AND CAPITAL GAINS TAX)

Motion made, and Question,
That, for the purposes of income tax, corporation tax, and capital gains tax—

(a) the territorial sea of the United Kingdom may be treated as part of the United Kingdom;
(b) activities (including activities of holders of offices and employments) carried on in connection with the exploration or exploitation of the seabed and subsoil in a designated area within the meaning of the Continental Shelf Act 1964 may be treated as carried on in the United Kingdom: and
(c) all profits or gains arising from rights, and all gains accruing on the disposal of rights, connected with such activities carried on in such an area or in the territorial sea of the United Kingdom may be brought within the charge to tax;
and any provision made in pursuance of this resolution may provide for the recovery of tax charged there under from persons other than those primarily liable for it.—[Mr. Barber.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

24. STAMP DUTY

Motion made, and Question,
That provision be made for charging stamp duty in connection with certain transactions of or affecting corporations, limited partnerships and other bodies of persons.—[Mr. Barber.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

25. RELIEF FROM TAX (INCIDENTAL AND CONSEQUENTIAL CHARGES)

Motion made, and Question,
That it is expedient to authorise any incidental or consequential charges to any duty or tax (including charges having retrospective effect) which may arise from provisions designed in general to afford relief from tax—[Mr. Barber.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

PROCEDURE (FUTURE TAXATION)

Motion made, and Question,
That, notwithstanding anything to the contrary in the practice of the House relating to the matters which may be included in Finance Bills, any Finance Bill of the present Session


may contain provisions taking effect in a future year for increasing relief from income tax on savings bank interest.—[Mr. Barber.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

PROCEDURE (CHARITIES)

Motion made, and Question,
That, notwithstanding anything to the contrary in the practice of the House relating to the matters which may be included in Finance Bills, any Finance Bill of the present Session may contain provision for payments to charities claiming repayment of tax.—[Mr. Barber.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

PROCEDURE (FEES AND OTHER CHARGES)

Motion made, and Question,
That, notwithstanding anything to the contrary in the practice of the House relating to the matters which may be included in Finance Bills, any Finance Bill of the present Session may contain provisions for the payment of fees or other charges in connection with services or facilities provided or documents issued in pursuance of Community obligations or inernational agreements or arrangements.—[Mr. Barber.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

FINANCE [MONEY]

Queen's Recommendation having been signified—

Motion made, and Question,
That, for the purposes of any Act of the present Session relating to finance, it is expedient to authorise the payment out of moneys provided by Parliament of amounts related orepayments of tax made to charities for the year 1971–72 and payable to charities claiming such repayments for the year 1973–74 or any of the three subsequent years of assessment.—[Mr. Barber.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

Bill ordered to be brought in upon the Resolutions relating to Ways and Means and Finance [Money] and the Orders relating to Procedure made this day; to be brought in by the Chairman of Ways and Means, the Chancellor of the Exchequer, Mr. Patrick Jenkin, Mr. Terence Higgins and Mr. John Nott.

FINANCE

Bill to grant certain duties, to alter other duties and to amend the law relating to the National Debt and the Public Revenue, and to make further provision in connection with Finance, presented accordingly by Mr. Terence Higgins and read the First time; to be read a Second time tomorrow and to be printed. [Bill 88.]

BUSINESS OF THE HOUSE

Ordered,
That the Motion relating to Representation of the People (S.I., 1973, No. 79) may be proceeded with at this day's Sitting, though opposed, until half-past Eleven o'clock.—[Mr. Jopling.]

LOCAL ELECTIONS RULES

10.18 p.m.

Mr. John Fraser: I beg to move,
That this House takes note of the Local Elections (Principal Areas) Rules 1973 (S.I., 1973, No. 79), dated 16th January 1973, a copy of which was laid before this House on 31st January.
The statutory instrument sets out the rules for the principal areas—the new counties and district areas. The main body of the rules are welcome, representing an improvement on the rules operated previously. They have been generally agreed to the satisfaction of all the major political parties.
I shall confine myself to the fourth and fifth schedules, which make changes in the main body of the rules for this year's local government elections but for no other. I start with the trivia. On page 33 in a column setting out times for handing in nomination papers and so on, there are omissions. The word "noon" should appear in certain of the times. As the rules stand, a candidate could be standing at the town hall at a minute to midnight hoping to send in his nomination paper.
At the bottom of page 34 there is a printing error. Instead of "elector" the word "elect" appears. It reminds me of when I canvassed some Jehovah's Witnesses. When I asked for whom they would vote, they replied, "The Almighty" I am sure that the word "elect" in the rules is not intended to refer to the Almighty but is a printing error and should be corrected.
The coming local government elections are contests of major importance. Political commentators have treated them as a mini-general election and I suppose that on past performance that is the right kind of treatment. It is a pity that the

local government elections are treated as a kind of vivisection at local level for the benefit of national political purposes. It is vital that the local elections should be seen as being important in their own right. The magnitude of spending by the new authorities is enormous. The spending by the Greater London Council in one year is greater than that of many nation States. If we take any of the new metropolitan counties, they are larger in population terms than many a nation State. Indeed, some have larger populations than some European States.
A great deal of importance has been attached to the recent election in the Republic of Ireland. The population of the GLC alone is almost twice that of the Republic. The GLC would probably tear more miles out of London to make motorways than many other nation States would choose to do with an entire country. The new authorities concern themselves with education, a subject on which there are deep and often sincere controversies and on which sometimes local views held by a political party may differ from the views held by the same party at national level.
The coming elections will also involve housing, perhaps one of the major issues and a subject which we shall be debating later this week. It is important to remember that the public sector of housing is solely the concern of local government. All that central Government can do is to exhort and, in the case of the Housing Finance Act, to extort. The local authorities are important because they exercise a major control over the quality of our environment, over social services, over law and order, and I hope that eventually many other responsibilities will devolve upon them, including, for instance, health services, family planning and ultimately the public ownership of land for development and redevelopment. Local government is important in its own right. That is the first thing to be said about these coming elections.
The second thing is that they are novel. For instance in the Greater London elections which take place with the other county elections on 12th April, the electors in the GLC area for the first time ever will be choosing one councillor per


parliamentary constituency, something which has not happened before. At one time we had three councillors per constituency. Then we went to a system of between two and four councillors to a borough. Now we have this novel situation.
They will be novel elections in the sense that for many of the old county borough electors will, for the first time in memory, be voting twice, once in April and again later in the spring. This is something to which electors in county boroughs are not used. They will be novel too because people will be voting for entirely new authorities, and I will not say much about that.
It behoves us to do everything in our power to ensure two things. First we must ensure that the electors understand what they are voting about. I am not talking about political issues but about the functions and powers and importance of local government.

Mr. Michael Cocks: Would my hon. Friend like to dwell upon the fact that several months ago the Government were asked what they intended to do about informing the electorate of the new arrangements? Would he like to comment on the fact that nothing has so far been done?

Mr. Fraser: I am coming to that. First of all we have to make sure that the electors understand the new machinery and powers. Secondly we ought to regard it as an important duty to do everything we can to ensure that people participate in the elections. I greatly regret that poll cards are not obligatory. If ever there were a case for making it mandatory to send out such cards it is typified by these elections. Schedules 4 and 5 to these Rules have a kind of built-in inertia. First a local authority must resolve to send out poll cards. Secondly, the local authority, before passing any resolution to send out poll cards, must be satisfied that the returning officer is able to comply with the resolution.
When this subject was raised briefly in a debate on Representation of the People Rules last week, we were told that the Government could not prescribe poll cards for the first elections for new county and district councils because in

certain areas it was not possible to have the cards available in time. I do not know to which areas the Minister was referring, but there are a lot of other areas where it would be possible, if there were no inertia, to send poll cards out.
If there were a General Election on 12th April and returning officers did not have as much notice of it as they have had of the forthcoming local elections, they would still have to send out poll cards, and would do so. I cannot see the justification, except in one or two areas where it is very difficult, for a general exemption from the mandatory duty to send out poll cards.
I quote again the example of London, where the constituencies are well known and where there has been no recent redrawing of boundaries. Yet one single returning officer in the whole GLC area could prevent the sending out of poll cards—that is, assuming the GLC had the will to pass the appropriate resolution. I ask the Minister to reconsider the rule that the sending out of poll cards should not be mandatory. Some people regard the poll card as a prerequisite to voting. Others regard it as important because it tells them where their polling station is. Many people will be going to new polling stations for the new local authorities. The Government should either take the rules back to rewrite them to ensure that it is obligatory to send out poll cards unless it is absolutely impossible to do so.
I turn now to the question of publicity. The Government have not been backward in their use of information services. I make no complaint about that. But value added tax, which is infinitely simpler in its concept to understand than the new local government structure, has involved Customs and Excise officers stumping the country, addressing meetings, and television and Press advertising. Again, going into Europe involved massive handouts of Government literature. The Housing Finance Act and the family income supplement have been presented on television in campaigns of soapflake proportions.
Likewise, I am urging the use of television, radio and newspapers to advertise on the same scale, explaining to people what these elections are about and


what the powers of their respective authorities are. Obviously, such advertising would be without political slant, but it should be fully explained just how important these local elections are. In some places, people will have to vote at different times for two authorities, and they should know what the functions and importance of those respective authorities are.
Whether the issues be dustbins or national parks, housing or education, or family planning or town and country planning, it is better that the electors should understand what they are about and be encouraged to take part in them. It is possible to do this by encouraging as far as possible the sending out of the poll cards, by the Government undertaking, in consultation with the political parties, a programme of advertising and information services to show what the elections are about, and by encouraging the local authorities to do likewise. Local government is far too important a matter to be left to the minority of the electors.

10.29 p.m.

Sir Harmar Nicholls: Nobody could object to the theories which the hon. Member for Norwood (Mr. John Fraser) put forward or, if one aims at perfection in these matters, to some of his suggestions about informing the public and giving guidance. However, the implication of what he said was that suddenly we have a new local government set-up which for the first time is important and that what we had before did not matter. Now, apparently, because it is new, we must react as though people had not been aware for a long time, since the 1880s, that local government was important.
But people do not want Government pamphlets to tell them that local government is vital and that they should elect the best men to their local authorities. It is not a question that suddenly local authorities have started to spend a lot of money. They have been the great spenders of public money for a long time and, by and large, they have not done badly with it because they understand local needs better than we in this House do. I resent the suggestion in the friendly speech of the hon. Member for Norwood that the Government must now

tell local authorities how to run their show.

Mr. Ted Leadbitter: There are present four members who served on the Standing Committee which considered the Bill which reorganised local government. I do not see any Conservative member of it. Secondly—

Sir H. Nicholls: I did not give way so that the hon. Gentleman could make a speech—

Mr. Deputy Speaker (Miss Harvie Anderson): Order. We cannot have two hon. Members on their feet at the same time. It is reasonable to expect that any hon. Gentleman who wishes to make a contribution should be able to do so. But a contribution is different from a question.

Sir Harmar Nicholls: I have made the only point which I wished to make. It is all very well for hon. Members opposite to suggest that we must dot the i's and cross the t's and that the Government must put their oar in to the extent they suggest, but I am very jealous of local government remaining local. I have been a local councillor in a small urban district council for 15 to 20 years, and it runs its show very well. It knows the local needs. I am a little suspicious, despite the delightful words of the hon. Member for Norwood, of the suggestion that the Government should tell it what to do.
I have nothing against what has been said about poll cards. I agree that anything which makes polling easier is not bad. The rules do not stop local authorities issuing poll cards. I am sure that at the right time, if they feel that they are necessary in order to achieve proper representation on their local councils, they will do that. In the light of experience, it may be a good thing to extend the practice.

Mr. John Fraser: Has the hon. Gentleman read the rules?

Sir Harmar Nicholls: Has the hon. Member read the rules? Why should he suggest that he is the only one who is interested enough in these matters to comment on them? That is not in keeping with his normal behaviour. Of course one knows what one proposes to talk about. I am suspicious of the hon.


Gentleman and his hon. Friends because their belief in the centralisation of many other matters brings them to the point at which they are prepared to centralise and undermine local government in its truest and fullest sense.
I warn the House against doing anything which might stop local authorities being truly local. If the hon. Member for Kettering (Sir G. de Freitas), who represents a constituency next to mine, can bring evidence to show that his constituency needs central Government nannying, his experience is different from mine in Peterborough.
I warn the House against this Parliament thinking that it alone knows how an election should be organised. Local authorities have organised elections for many years. It is not a bad thing for any Government to leave a certain leeway to local decision when laying plans for the future.

10.35 p.m.

Sir Geoffrey de Freitas: I am amazed at the speech that I have just heard by the hon. Member for Peterborough (Sir Harmar Nicholls). My hon. Friends and I who are here this evening have all served on local authorities. How many Members of the Conservative Party who come into this House have taken the trouble to try to get themselves elected to local authorities? The hon. Member for Peterborough has. But when local authority matters are discussed we notice how few hon. Gentlemen have served on such authorities. The hon. Gentleman lectured us about our unwillingness to leave power to local authorities. We are discussing the giving of power to local authorities and, in Schedules 4 and 5, exempting them from the obligation to send out poll cards. It is important to consider this matter on its merits.

Mr. Nicholas Scott: As one who served for six years on a London local authority, the right hon. Gentleman must forgive me if I regard the interventions of the Labour Party in local matters with suspicion.

Sir G. de Freitas: Why?

Mr. Scott: Because of the London Government Act. The Labour Party thought that it would lose control of the London boroughs, so it postponed the elections for a year, and a number of

hon. Gentlemen opposite voted for that extraordinary gerrymandering manoeuvre. The fact that when that year was up they lost by a greater margin is beside the point.

Sir G. de Freitas: I do not know what that has to do with the subject that we are discussing.

Mr. Scott: I am suspicious of the Labour Party's motives.

Sir G. de Freitas: I came to protest about the way that the Government are pandering to this Home Office nonsense.
Some years ago I was the junior Minister at the Home Office. In those days there were only two Ministers at the Home Office and my boss the Home Secretary was also Leader of the House, so a good deal of work was imposed on me, the junior Minister. I had to deal with electoral matters, amongst others. In the Home Office people were always saying, "But this is imposing too much on the returning officer." I have got to know many returning officers. They are robust people and able to undertake—

Mr. Michael Cocks: They are crafty.

Sir G. de Freitas: Returning officers are not so much crafty as highly intelligent people who are willing to undertake duties imposed on them for electoral purposes for the benefit of the whole community.
I am worried that Schedule 4 does not make it essential for the returning officer to issue these poll cards. It looks as though the Home Office has again surrendered the easy way and said that it is too much to compel returning officers to do this. It is most important that we should know why returning officers are exempted from this obligation. It is important that at the beginning of this new local authority system we should have a wide understanding of the areas and the greatest encouragement to a large number of voters. If it is recognised as important in future, why not for the first time?

10.39 p.m.

Mr. Michael Cocks: I have great respect for the Minister of State, and I am sure that his contribution to the debate will be of the highest standard compared with the contribution


by the hon. Member for Peterborough (Sir Harmar Nicholls). I must point out that his great panegyric about local government control is blown sky high in the Housing Finance Act which sets down the formula for council housing which is one of the major responsibilities of local authorities.
I will pass over the comments by the hon. Member for Paddington, South (Mr. Scott). I have always had great respect for the Minister. He is thorough and faces his responsibilities very well indeed. On 14th December, in reply to a Question by me, asking when he intended to lay the local election rules before Parliament, he said:
As early in January as practicable."—[OFFICIAL REPORT, 14th December 1972; Vol. 848, c. 186.]
I congratulate the hon. and learned Gentleman, because he kept me on tenterhooks throughout the month and on 31st January the rules were laid. Such delicate timing is to be admired, but since they came into operation on 1st March that left a bare 28 days for them to be considered, and that is cutting things far too fine.
I intervened during the speech of my hon. Friend the Member for Norwood (Mr. John Fraser) on the question of propaganda for these local government elections. This is a major upheaval for a number of people in Bristol. For the first time for a number of years people will be asked to vote for more than one candidate. This will be a major departure from normal practice. If the Minister is in any doubt about that, I suggest that he visits an overspill estate to which people have gone from Bristol to see things for himself. People are faced with a ballot paper which is more like a football coupon than an election document. He will realise that there should be a major propaganda effort by the Government to inform people of the content and structure of the new local government.
On page 13 of the rules one sees repeated again the elaborate arrangements for the declaration of secrecy. I think that it is a truism that one Government Department does not take very much notice of what another does, because in Committee I pointed out that although there were elaborate arrangements for the secrecy of ballots—with

which I fully concur—when it comes to the chairman of the planning committee making telephone calls about highly confidential matters which could result in financial gain to certain parties if the details were known, he makes those calls on a shared party line. It is nonsense to provide for secrecy in one respect and to ignore it in another.
I am at something of a loss to understand the questions set out on page 15 to be put to voters. There is here a scrupulous procedure for the questions which may be put to them. The presiding officer is given strict instructions as to what he may ask if required by a candidate or his election or polling agent.
Perhaps one may contrast that scrupulous attention to detail with what one finds on page 30. The first comment on the back of the card is:
You need not take this card with you to the polling station, but it will save time if you take it and show it to the clerk there.
I am amazed that that should be printed on the official poll card, because in Committee the point was made at some length that we must try to break down the idea in the minds of the general public that it is essential for them to have their poll card or number with them when they go to vote.
I repeat that I am amazed to see the statement:
You need not take this card with you to the polling station, but it will save time if you take it and show it to the clerk there.
There is there an in-built suggestion that clerks at polling stations will be asking people for their poll numbers and cards. If the Minister has tried to put right the situation which we described in Committee, I can only tell him that he has made it a great deal worse. We shall get badgering on an official basis by the clerks on whether electors have their ballot papers, whereas until now it has all been unofficial. I deplore this sort of thing being placed on the card. Different wording could have been used, and once again the Government have missed the point.
Page 31 contains the biggest contradiction of the lot. At the top it says:
The voter should see that the ballot paper before it is handed to him, is stamped with the official mark.
Yes earlier in the rules we are told that the official mark is to be kept secret. In


fact, so secret is the official mark to be kept that a different one is to be used each year and the same one is not to be repeated within the space of five years. How on earth is an elector to know that the ballot paper has been stamped with the official mark? I shall be interested to hear the Government's reply on this point because this seems to be an absolute nonsense. The fact that the ballot paper is put into a hand-stamp and the machine is depressed is one thing, but how is the voter to know that the mark thus made is an official mark?

Sir Harmar Nicholls: In fairness, the system is not as stupid as the hon. Gentleman suggests. It is true that nobody can tell whether the imprint is official, but the hon. Gentleman must have had the experience, as I have at times—and I discovered that the last election, including both local and parliamentary elections, was my eighteenth election—of ballot papers being spoiled because they had not been stamped. It is all right provided that the voter makes sure that there is an imprint, because one would not expect crooks to be in charge of polling booths.

Mr. Cocks: I am grateful for that helpful intervention, but if it is a practicable proposition for the elector to see that there is a mark on the ballot paper, why do they not say so here? Why do the rules specify the "official mark"? For all the elector knows, it might be a subliminal advertisement for soap flakes. It seems an extremely sloppy way of going about the matter. This is the sort of thing that has gone on year after year, and no notice seems to have been taken of what hon. Members have said about the situation.

The Minister of State, Home Office (Mr. Mark Carlisle): Since the hon. Gentleman obviously regards this as an important point, could he from his great experience say whether this provision has given rise to any great problems over the last 50 years or so?

Mr. Cocks: I answer the hon. and learned Gentleman by saying that there is an hon. Member in this House who was once disqualified from standing in a local election in Bristol, although he had a majority of votes cast, because on a recount it was found that eight or 12 votes

did not have the official mark. Therefore, his opponent won—so it is important.

Mr. Carlisle: Does the hon. Gentleman mean that it had a mark but not the official mark?

Mr. Cocks: There was not a mark on the paper. This sort of hair-splitting does not endear itself to the general public. I hope the Minister of State will not try to wriggle out of this. He is a nice chap, and I hope that he is not going in for hair-splitting on this issue.
I come to Schedule 4, and I believe that it is disgraceful that in an entirely new structure poll cards will not be mandatory on local authorities. The hon. and learned Gentleman rather blew the gaff because I asked him before Christmas about whether he was confident that returning officers would be able to issue poll cards for any General Election that might take place during 1973, and the answer was "Yes".
Circumstances can be imagined when a General Election will produce a close result, with possibly a majority of two or three. We can all imagine circumstances which might result in two or three General Elections within a few months. I am confident that should that unusual happening take place, poll cards would be issued on each occasion to every elector.
That blows apart all the platitudes which we have had from returning officers about being unable to issue cards to all electors. There is no doubt that, given the will, returning officers could send a poll card to every local elector for the new local authority elections. This is the biggest indictment of all. If the Government were serious in wanting full participation in local democracy, they would have taken the opportunity to extend the new structure to every elector.
I find the instrument unsatisfactory. I hope that the Minister of State, even at this late stage, will give an indication that the Government mean to get down to business and to tell the people what is involved in the new local elections and how they might participate so that everybody can exercise their full democratic rights.

10.52 p.m.

Mr. R. B. Cant: Perhaps it is convenient for hon. Members to declare their pedigree. I have been a member of Stoke City Council continuously for 21 years. I think that I am one of the very few hon. Members who are standing for a county council election on 12th April.
I am in an embarrassing position because I find myself part in agreement and part in disagreement with my hon. Friends. There is a certain virtue in allowing local authorities to decide whether they want to issue poll cards. I know that it may seem a mighty convenience for the electors to have poll cards, but there are many other considerations. Hon. Members might be surprised that some Labour-controlled authorities have decided to have poll cards for county council elections but have not declared that they are not having them for the more intimate local elections.
The motivation of local authorities will be different, but any authority—and I suppose that implies the political control of local authorities—should be in a position to decide, for various reasons which it may keep secret, not to have poll cards. The matter should be left to the authorities.
My politically conscious hon. Friends will appreciate fairly fully that while some Labour-controlled councils have decided not to have polling cards, their decisions have not been based on the highest of motives. Nevertheless, it is a local political choice which we must accept. On the other hand, I agree forcibly with my hon. Friends that when we talk about the need for a good deal more publicity we must think in terms of the county elections which take place on 12th April. We must remember that the Government—perhaps because there are more whiz-kids on the Government benches than the Opposition's benches—appreciate the virtue of enormous expenditure on these elections.
Anyone who has been attending local meetings or selection conferences of his political party will have been made fully aware that people do not fully understand the changes that are taking place. The changes may be fairly clear-cut in some areas. In Stoke-on-Trent, which had a county borough from the beginning

of the century, people are still bemused about what is happening, despite the attempts of political parties to educate them. People do not understand what a county election means, why there is only one candidate per ward, or what is implied in the transfer of a whole range of services from an authority that has nurtured them for decades to a rather remote county council.
Many people who have voted at local elections only once in their political lives will now be faced with voting for a second time for a district which is not coterminous with the area with which they have been associated as a municipal borough or urban district. In other words, they may be involved in an entirely new county situation and also in a new geographical unit constituting a district.
Local democracy would not be necessarily destroyed by this process if the Government were to spend some money through the national mass media on a campaign to explain the new organisation of local government. Local newspapers may not be amenable to the exercise of the processes of political education. Although the one in Stoke-on-Trent is Conservative in its bias, I think it does a fair job in this respect, provided that it can preserve a balance. The local radio is much more useful and flexible, but all areas do not have local radio.

10.58 p.m.

Mr. Ted Leadbitter: I did not intend to intervene, Mr. Deputy Speaker, for reasons you will understand—[Interruption.]—I am still thinking in terms of local government. However, Mr. Deputy Speaker, you will understand why I say that I was not particularly anxious to take part in this debate.
The hon. Member for Peterborough (Sir Harmar Nicholls) has surely not understood the intention of my right hon. and hon. Friends, whose contribution has shown, I hope to the hon. Gentleman's surprise and pleasure, that we are concerned, not with controversy, but with how best to take this final step into the new system of local goverment and make it a success. That is the objective. Those of us who served on the Committee on the Local Government Bill over many weeks were similarly constrained when controversy arose because we understood that the function of Parliament primarily is to address our minds to what is right. That


is why we enjoyed the proceedings considerably. We were doing a useful job.
Having said that, it is clear—indeed, the Home Office must be satisfied that it it is clear—that there has been too much haste in seeking to implement the proposals in the Act. The regulations were placed before the House on 31st January. Those of us who have considerable local government experience—I include the hon. Member for Peterborough—understand that local government officials are bound to be hard pressed at present in dealing with these rules. We should bear in mind that much of what is in the rules is well known practice in local government administration. Nevertheless, one of the greater pressures at present is the process of finding out, even for those involved in local government, such as councillors, aldermen and senior officials. We in the recommendation and decision-making areas are considerably frustrated in trying to find some clarity in the functions with which they are expected to deal at district and county levels.
The frustration and the amount of discussion taking place, the impingement upon them of statutory instruments or, to put it bluntly, expecting them to apply the Act, have brought enormous problems. Parliament would have been wiser to have allowed local authorities some breathing space, and next year might have been more successful.
In addition to what my hon. Friends have said—I am sure that the thought is also on the Government benches—the principle of polls cards has been accepted. The exception is in the first election. If the principle is good enough for subsequent elections, I should have thought it vital in this election, purely because there is a need to overcome the frustrations and pressures in the decision-making areas in order to convey to the people who will be making the final judgment on polling day the importance of their identification, the place where they are to vote and the material information required in order to exercise their right to have a ballot paper in a particular place.
My hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant) has mentioned the problems arising in different geographical areas. The Government should think again about exercising Rule 24.
There is one point which I ask the Minister to reconsider in the Department. Rule 21 states:
The returning officer shall provide a sufficient number of polling stations and, subject to the following provisions of this rule, shall allot the electors to the polling stations in such manner as he thinks most convenient.
I address myself to the phrase
a sufficient number of polling stations.
Without an explanatory note in the rules, there is possibly a need for the Department to consider how best, in circular form, to advise returning officers or in practice a registrar or, in some cases, the town clerk or chief clerk of the authority, what is meant by
a sufficient number of polling stations.
There are such great disparities that it must be one of the several elements which are the cause of the low polls in some parts of the country. Guidelines on what is meant by "sufficient polling stations" are necessary.
There is need also for publicity. The House may, I think, have missed the point here. Spectacular news of events of remarkable significance constantly impinges itself on the public mind nowadays, taking attention away from matters of more immediate importance. For instance, the news of the past week has given rise to a good deal of public concern and comment. It is necessary that the mind of the public be brought back from time to time to the matters which immediately affect them, and this year's local government elections are a case in point. The Government have exercised their power and provided finance to give publicity in various directions which they have thought desirable, sometimes in their own interest, and on this occasion they ought to spend some money in the interest of the people themselves.

11.6 p.m.

The Minister of State, Home Office (Mr. Mark Carlisle): We all appreciate the desire of the hon. Member for The Hartlepools (Mr. Leadbitter) not to speak in this debate, and I am sure that we all feel sympathy for him in that he did not manage to achieve his desire. However, having listened to him, I am glad that he did not.
As the hon. Member for Norwood (Mr. John Fraser) said, these are the new rules which will govern the future conduct of local elections, Schedule 2 deals


with the rules for elections after those for this year, and, subject to Schedules 4 and 5, deals with those for this year. As the hon. Gentleman said, they have all been agreed with the local authority associations and with the political parties.
Only two matters of major substance were raised in the debate: first, the significant and important change with regard to the issue of poll cards; and second, the matter of publicity, raised by the right hon. Member for Kettering (Sir G. de Freitas), the hon. Member for Stoke-on-Trent, Central (Mr. Cant) and my hon. Friend the Member for Peterborough (Sir Harmar Nicholls). However, before coming to those major matters, I shall deal with the three peripheral matters, if I may so call them.
The hon. Member for Norwood was right to point out that there are two errors in the rules. I think that he will accept that one of them is merely a printing error, the word "elect" for "electors". The other is of more substance, I concede, that is, failing to make clear in Schedule 4, governing the first elections, that various things have to be done by noon on a particular day. Leaving out those words, as the hon. Gentleman said, means that those who desire to stand for the first election have 12 hours longer in which to put in their nomination forms. I think that the returning officer will have 12 hours longer to declare the names of those who have put in their nominations, and each candidate, having entered the fray, will have 12 hours in which to withdraw. As the hon. Gentleman said, they could put in their nomination well after noon on the day in question. We considered this matter. Guidance was given that the error had occurred, but we felt that it did not justify amending the rules once they had been laid before Parliament.
The other peripheral point was the hair-splitting point raised by the hon. Member for Bristol, South (Mr. Michael Cocks) who shares one distinction with myself. He and I are the only two people taking part in this debate who have never sat on a local authority. I say that since the hon. Gentleman implied that everybody else on the other side of the House had taken part in local authority work.
It is, if I may say so with respect, a hair-splitting point. I suppose if we had

not made any reference to an official mark on the ballot paper he would have said how ridiculous it was to be so sloppy. Such detailed points are discussed and agreed by members of the Conference on Local Electoral Law which has representatives from the main political parties as well as the local authority associations and returning officers. The reference to an official mark on a poll card has never to my knowledge caused any inconvenience in the past.

Mr. Gordon Oakes: On the point concerning returning officers and the extra 12 hours, can the hon. and learned Gentleman say whether this means that a returning officer or his staff on these various days must stay in the office until midnight in case something happens up to that time?

Mr. Carlisle: I think that must be so. There is a right to enter a nomination up till midnight rather than till noon. This applies only to the first election for the district and county elections. The omission of the words "noon on that day" is an error and it entitles a person to put in his nomination up till midnight. I am sure that those who wish to stand for election will have sympathy and consideration for the returning officer and will not delay putting in their nominations at the 59th minute of the 11th hour.
May I return to the two issues which are of importance. One is the question of publicity, and the other is poll cards. I will deal with publicity first. It does not arise directly out of these rules, but it is important. I confirm that the Government share to the full the concern of hon. Members that there should be adequate publicity of these elections both for the new counties and for the new districts, and, indeed, they share to the full the concern expressed as to the importance of these elections. It is proposed that publicity shall be provided for the elections and, indeed, the intention is that for three weeks before each election for the counties, the non-metropolitan districts and the metropolitan districts there will be a concerted campaign of publicity which has been agreed by the Home Office in conjunction with the Department of the Environment, my right hon. Friend the Secretary of State for Wales and also local government information offices. This will include Press advertisements and advertising on


the mass media by means of television films and radio.
I am advised that that publicity will not only draw attention to the dates of the various elections but will also explain the functions of the various councils. I share to the full the views expressed by the hon. Member for Stoke-on-Trent, Central, and a sum of money will be spent by central government for that purpose.

Mr. Michael Cocks: Would the Minister please tell the House whether a public relations firm has been engaged for this publicity? If so, what experience has the firm had of local government and what is the fee paid to the firm?

Mr. Carlisle: The answer to the first question is "no", and therefore the second and third questions do not arise. It is being done by the local government information services and by the Departments. A sum of money exceeding £100,000 will be spent on this publicity.
I come now to the most important point of all concerning the poll cards. I was slightly taken back by the force and strength of feeling on the Labour benches on this subject about the need for the cards to be mandatory. I reflected, particularly when the right hon. Member for Kettering was speaking about the importance of poll cards and reminding us of his days in the Home Office, that until these rules which are now before us not only were poll cards not required and not discretionary but they could not be used by any local authority unless it passed a private Act for the purpose. Only two counties—Cheshire and Cornwall—ever went to the extent of passing a private Act.
So we are making a major move forward in providing for poll cards at local elections. The effect of the rules is to provide under Schedule 2, after and not including the first elections this year, that they shall be mandatory. I have been asked specifically why, if we agree, as the Government and the Home Office do, that poll cards are a useful and valid means of drawing publicity to local elections, we have not made them mandatory on local authorities in the first year. The answer is simple. It is not from a lack of desire by the Home Office

to see them used. It is merely a question of the practical difficulties involved.
We have to face the fact that as of this moment we have not yet completed the warding of the non-metropolitan districts. I am told that at this date, faced with elections for the metropolitan districts on 10th May this year, none of the non-metropolitan districts has been named and that problems of this kind exist, caused by the shortage of the time scale.
The hon. Member for The Hartlepools will no doubt accept that if these councils are to be in existence and active from 1974 it is important that the elections should take place as early as possible to get all the committees set up. We were under considerable pressure and I personally agreed to put back the date of the non-metropolitan districts to 7th June from the earlier May date. That was what was desired, but putting the date back to 7th June, we advised, was cutting it very fine if the district councils were to have the opportunity of appointing their chief officers and things of that nature if the councils were to come into effect in April 1974.

Mr. Leadbitter: The Minister is seeking to be helpful but he is underlining the acute problem of the ward divisions which have not yet been settled in the metropolitan counties. That is sad enough in itself, but arising from it is the reason for not having the poll cards. How much more difficult will it be for the electors to be informed about where they should vote by people who have only lay experience in these matters, especially when, as the Minister said, the districts are not yet formed. It would have been better to have had the professionalism and expertise of the people who are paid as officers to prepare the poll cards for the first elections.

Mr. Carlisle: I hope that the hon. Member will not feel that there has been any dragging of feet in the Home Office over the warding. It requires a substantial effort to get the councils out in the time and we hope to have the warding of the non-metropolitan districts announced within the next four weeks. But there is an awful lot to do. I know that the hon. Member is taking this in a sensible and rational way and that he will accept that there is much to do. With the Bill receiving the Royal Assent only in October it


was frankly impossible to carry the warding through at an earlier stage. If polling cards had been made mandatory on this occasion we would have been placing a requirement en local government which in some areas could not have been carried out and which in other areas could not have been carried out adequately. The polling cards could not have received the detailed thought so necessary for them.

Mr. Leadbitter: Mr. Leadbitter rose—

Mr. Carlisle: I cannot give way again The hon. Member has the Adjournment debate and I know that he is anxious to get to it. The effect, therefore, is that after the first elections, poll cards will be mandatory. For the first elections they are discretionary, and the decisions whether to issue them will be that of the council employing the returning officer. Before it can make that decision the returning officer has to satisfy it that he will be able to carry out the provisions. We hope very much that they will be widely used, but we did not think it was right, within the time-scale we had, to make a requirement that we were not satisfied it would be physically possible to carry out in all parts of the country.
The question of poll cards for parliamentary elections was raised. I am told that the answer is that parliamentary election poll cards are always printed well in advance, and the details on them are the same as they were at the previous election. Here we are setting un new districts and counties, and we should have to print new poll cards.
It is correct to say that, whereas the decision whether to have polling cards in the Greater London area is that of the GLC, that is dependent upon each local borough returning officer's being satisfied that he can carry out the requirements. I am told that the GLC does not intend to go ahead with the issue of polling cards. Therefore, the other issue does not arise.

Mr. Oakes: There are no warding problems in London. Why give that discretion to the GLC?

Mr. Carlisle: That is what I said. The issue does not arise if the GLC chooses by its democratic vote not to have them. It has not had them in the past. It is a matter for the GLC. It is not depriving

the electors of something they have had. This year the matter is discretionary, and in future years it will be mandatory. I understand that in its discretion it has decided that it is not likely to have them. Therefore the question of the returning officer of the individual boroughs is not relevant.

Mr. Michael Cocks: Will the hon. and learned Gentleman deal with the point I raised about the statement that the voter need not take the card with him to the polling station but that it will save time? That puts power into the hands of officious clerks.

Mr. Carlisle: I have dealt with one hair-splitting point and will deal with this, which is not perhaps a hair-splitting point. As far as I know the words on the back of the poll cards are similar to those on the back of the poll cards at parliamentary elections, and they are accurate. The elector need not take them with him. Part of the trouble is that there are those who believe that they cannot vote unless they have a poll card. The words make it clear that they can vote without having it and need not take it, but they point out the practical effect. From our own experience we must all accept that having a poll card may save time in the polling station. I can see nothing wrong in having those words written on the back.
The indications are that in a high proportion of areas arrangements are being made to issue poll cards. In some areas it may be that the returning officer has not been satisfied that it would be practical for him to issue poll cards and has therefore informed the council accordingly. But the council has a duty to consult the joint committee for their advice whether poll cards should be issued. The Home Office attitude, and the power given in the rules, at the request of all the political parties, is to give a discretion in the hope that it will be used and that wherever practical poll cards will be used for the first and most important elections for the new councils this year.

Sir Harmar Nicholls: This last point is something which the Department might consider in future. If the words on the polling card were
It is advisable to take the polling card but it is absolutely essential …


that would encourage people rather than discourage them and make the job of the polling clerk easier.

Mr. Carlisle: I take the point. While I believe that the words are identical to those which have always been used, if my hon. Friend feels that an alternative form of words would be more beneficial and useful this is perhaps a matter we can look at in any future review of the electoral rules. That would be a matter for the Local Government Conference on Electoral Law which goes into these details, in conjunction with the political parties.

Question put and agreed to.

Resolved,
That this House takes note of the Local Elections (Principal Areas) Rules 1973 (S.I., 1973, No. 79), dated 16th January 1973, a copy of which was laid before this House on 31st January.

ADJOURNMENT

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Gray.]

HOUSING COSTS (YARDSTICK)

11.26 p.m.

Mr. Ted Leadbitter: I raise tonight a matter which I find to be of national concern despite the fact that I have raised it on the Adjournment for the specific reason of drawing attention to the problem of local authority building in Hartlepool. I note, as a preliminary, that on 12th September 1972 The Times reported:
The Association of Municipal Corporations, which represents the interests of local authorities, is to ask the Minister of Housing for an early readjustment of the cost yardstock … The AMC also wants a review of the entire yardstick system.
I decided to look at the problem in other areas to find out whether my constituency was in an isolated position.
I found that in a recent survey in England, 47 housing schemes were investigated. Of those, 45 were above the Government's cost yardstick limitation. The highest was 78 per cent. above and the average 17·6 per cent. above.
I find that the Federation of Master Builders has expressed its dissatisfaction in terms relating to local authorities in this way:
There is virtual unanimity of opinion on the need for radical change in the cost yardstick policy.
Referring to the Municipal Review of January 1973 I find that the Housing Committee of the AMC reported in its minutes:
At a meeting with the Department of Employment on 3rd October 1972 we were represented by the City Architects of Bristol and Sheffield and the Chief Quantity Surveyor of Birmingham. Based on evidence from the six largest cities outside London the representatives pressed for an immediate increase in the yardstick of not less than 25 per cent. to bring the level up to the lowest current tender prices.
In a few sentences I have established that there is a major London problem, that there is a major problem for the six largest cities outside London and I now intend to show how this is a problem for the Hartlepool County Borough and surrounding local authorities in the North-East.
The basic yardstick was fixed in November 1971. A regional variation, known as a special market allowance, was fixed on 1st May 1972. My local authority first approached the regional office of the Department on a scheme involving 45 dwellings on a site known as the Oxford Street site. It was established from that first approach that it would be given a market allowance, in addition to the cost yardstick, of 12½ per cent. There was a subsequent meeting on 26th February, which I attended, when the offer of 12½ per cent. was raised to 15·18 per cent. I understand that during the past twelve months building trade wages have risen by about 32 per cent. in the region, and I have other pertinent figures.
The effect of the offer was to transfer a considerable financial burden on to the ratepayers, and it was not accepted by The Hartlepools authority because we are conscious that there is already an additional burden on them because of the Housing Finance Act and the fact that a proportion of social security benefits which were formerly tax-borne is now provided for by the local ratepayers.
It occurred to us that the small increase in the yardstick was intended to


help the council, but nevertheless we refused because these pertinent figures, which I shall give the House, could not escape our attention. The tender accepted for the 45 houses—the tendering was competitive—was £252,527. Allowing for the 15·18 per cent. market allowance, the known recognisable expenditure which the Government want to force the council to place on the rates is therefore about £28,914—that is, £643 per house—or, for a full year's programme of 200 houses, the demand on the ratepayers would be at the exceptionally high level of £128,600.
In an attempt to reduce its costs, the authority decided to see whether it could help by confining the central heating to ground floor level only. This was, of course, leaving only the minimal Parker Morris standards. The examination produced a tender price of £241,902, and taking the yardstick of 15·18 per cent. market allowance into account, the rate payers in this case would be expected to pay £18,299, or, on a total programme of 200 houses a year, £81,400.
These figures are particularly pressing on an authority such as The Hartlepools which, like many other authorities, has heavy pressures on it for rent and rates. If we are to have a continuing programme of housing with this kind of marketing allowance, we will see what effect there is on an authority like The Hartlepools.
In the first year, taking the full standards under the original estimate, the cost to the ratepayers would be £9,200; in the second year, £18,400; in the third year, £27,600; in the fourth year, £36,800, and in the fifth year, £46,000. The cost to the ratepayers, taking the reduced standard of central heating into account, would be £5,800 for the first year; for the second year £11,600; the third year £17,400; the fourth year £23,200; and the fifth year £29,000. These figures are simply not acceptable. I urge upon the Minister that they are worthy of the closest scrutiny, because Hartlepool would not present a case to the Department without the most careful examination of all its costings.
I decided to see whether the Hartlepool case stood alone. During the past two or three days I have sent a questionnaire to a number of local authorities in the North East and I have received replies as recently as this morning from 22 of them.

They are all quite emphatic and certain that the housing cost yardstick is out of date, that it does not reflect the reality of the situation and that it is in urgent need of review.
All the authorities are satisfied that building costs have risen by more than 20 per cent. during the past 12 months and 12 of the 22 authorities which have replied to me estimate that there have been increases of 25 per cent. in building costs. Four authorities have experience of increases of more than 30 per cent. Nine authorities are considering lowering the standards of their house building and some have already done so. One local authority in writing to me complains bitterly that it has been offered a market allowance on condition that it promises to reduce floor space to the minimum of the recommendations made by Government circular. In nine reported cases among these authorities the market allowances vary from as low as 8 per cent. to as high as 16·3 per cent., and even this highest figure does not bring much satisfaction to the authorities concerned.
A number of authorities have referred to the amount of money that they have already placed upon their ratepayers as a cost burden for their council house building. One authority reports to me that the ratepayers are expected to meet costs of up to £250 per house, a total cost per annum of £130,579. Another authority reports costs of £182 per house borne by the ratepayers at a total annual cost of £31,668. Another reports a cost met by the ratepayers of £1,000 per dwelling unit. Another authority reports that the ratepayers must meet a bill of £45,000 and yet another, a smaller authority, reports a sum of £9,141 as its cost in the first year of the effects of the cost yardstick. It is clear, therefore, that in the North Eastern Region 22 authorities have reported a situation which is highly critical for them. I suggest that they have not exaggerated the situation.
The total effect of this seems to be weighing heavily on overall building in the region. In 1970 the number of local authority building completions for the country as a whole was 180,129. In 1972 the total had fallen to 122,827. In the Northern Region the number of completions in 1970 was 11,410 and in 1972 it was 9,080. That represents a


serious reduction in house building at a time when we should be building more houses.
For Great Britain as a whole, the number of starts for those two years was 41,539 in 1970 and 29,318 in 1972. For the Northern Region, there were 3,539 in 1970 and 1,771 in 1972—a serious drop in starts. These figures are for the third quarter of each of the years.
I suggest to the Minister that it is time that the Government told the country, while exhorting local authorities to build houses, why they are saying to local authorities, without much publicity, "We are putting strictures on you. You must therefore build fewer houses". The chief official in the Northern Region surprisingly told me, "If the Hartlepools local authority cannot build its houses and cannot meet the contract, so be it". That is a condemnation of Government policy.

11.41 p.m.

The Under Secretary of State for the Environment (Mr. Reginald Eyre): I am sure that the House is grateful to the hon. Member for The Hartlepools (Mr. Leadbitter) for raising tonight the question of the housing cost yardstick in relation to housing in his constituency. I know that the concern he has expressed reflects the anxiety of the local housing authority, the Hartlepool County Borough Council, to do all it can to see that the housing needs of its area are dealt with. The council has asked me to receive a deputation to discuss the question of the Oxford Street scheme and a meting will be arranged in the near future.
First, I should like to emphasise that the Government are anxious to give all the help they can to all local housing authorities in their efforts to bring better housing conditions to their areas. I have in mind here the whole housing spectrum, private as well as council house building, house and area improvement, slum clearance and more generally other measures to improve the environment and social conditions.
It is right, too, that I should pay tribute to the achievements of successive Hartlepool County Borough Councils. I have been looking at what has been done recently. The achievement in the improvement field is particularly impres-

sive. The council aims to improve its 1,900 pre-war council houses to Parker Morris standards by June 1974.
The number of grant applications in Hartlepool approved by the Department in 1972 was double the number of the previous year. There is also much to be done in the private sector of improvement and, with the council's encouragement, the number of grants approved in 1971 was increased fourfold in 1972 when 774 grants were approved. The council organised a House Improvement Month campaign in the autumn of 1971 in which my noble Friend Lord Mowbray and Stourton was glad to take part. Moreover, the council has declared three general improvement areas, all of private housing.
On slum clearance, over 1,300 unfit houses have been cleared over the last five years and the council aims to clear its remaining unfit houses within the next decade.
This represents most commendable progress in an area which, I recognise, has been beset even more than has the Northern Region as a whole by employment problems. It says much for the council that it has been able to do all this. I hope, too, that it would acknowledge the practical encouragement it has had from the Government, through the high rates of improvement grant provided by the Housing Act 1971, and extended by the Housing (Amendment) Act 1973 through the new slum clearance subsidy, through the Government contributions to the derelict land and special environmental assistance schemes, through special development area assistance and through the Task Force which my right hon. Friend the Secretary of State for Trade and Industry has set up to tackle the problems in the steel works.
I am glad, too, that the council is encouraging the aspirations of people in the area to owner-occupation. It is selling council houses to tenants and offering the 20 per cent. discount allowed on full market value. Building for sale by private developers is also going ahead.
I appreciate, of course, that the hon. Member is presently concerned with the council's current plans for new council house building. It is, however, necessary to look at the total situation, not only in Hartlepool itself, but in the Northern Region as a whole, in order


to appreciate the position on tenders for local authority housing schemes.
What is being done in Hartlepool in the improvement field, in private house building and in local authority building for housing and other purposes reflects the general situation in the region. I have myself paid several visits to the region recently and have been greatly impressed by what is being done.
Improvement grants in the region have virtually doubled in each of the last two years to a total of no fewer than 52,000 last year, in 1972. New house building has meanwhile stayed at a high level, with 19,500 completions in 1972 and 22,000 houses under construction at the end of the year, the highest total for the last three years.
It is hardly surprising that, as a result of all this, encouraged by Government measures to stimulate employment, the resources of the building industry have been stretched. I am sure that hon. Members who represent constituencies in the Northern Region would not want us to reduce the massive help we are giving, but it does create problems which cannot be cured overnight.
The construction industry's labour force needs to be expanded. Employment in the industry had fallen during the period of several years when the industry lacked confidence in the future markedly as in 1969 and we have the strange paradox that, despite the difficulties of unemployment in this area, it is not at all easy to recruit skilled labour for building work. Now a new confidence has been created and I am glad to say that measures are now in hand to increase its capacity.
The number of craft apprentices entering the industry increased by 40 per cent. last year. The Department of Employment is rapidly increasing its provision for adult trainees. There are now 328 training places for building trainees at Government training centres in the region with an output of some 600 trainees a year, an increase of over one-third in training capacity over the past 12 months. Further expansion is planned to take place during the current year.
That is the general background against which the problem of the housing cost yardstick and the tender for the Oxford

Street scheme had to be looked at in my Department. Indeed, that is the situation in which the present method of applying the cost yardstick has to be seen. I must refute categorically the suggestion by the hon. Gentleman that we are using the yardstick to inhibit council house building. The reverse is the case. The basic yardstick has been increased by amounts varying from 34 per cent. to 62 per cent. depending on the nature and location of the scheme since it was brought into operation in 1967. We have increased the basic yardstick by amounts varying from 23 per cent. to 43 per cent. since April 1971. The last general increase was in May 1972. That is the date of the present basic yardstick.
Since then it is undoubtedly true that average tender prices have risen. But the movement has not been a steady one. During the latter half of 1972 tender prices for new local authority housing schemes began to move in a very erratic fashion. A study by the Department of tender prices showed that there was no consistent pattern even within the same region, and that while some local authorities were receiving tenders within the basic yardstick, others were receiving tenders well in excess of acceptable cost limits.
In this kind of situation a general increase in the yardstick would not have been a great deal of help. What was needed was a means of giving more flexibility to the system. That flexibility has already worked well in the London situation, to which the hon. Gentleman referred, as well as in other parts of the country.
It was in these circumstances that my right hon. Friend the then Secretary of State for the Environment announced during the debate on the Address on 2nd November last that he was prepared to give a special yardstick allowance for individual schemes where local market conditions made this necessary. These more flexible arrangements have been operating now for four months and, by and large, I think it fair to say that they have coped reasonably well with a complex situation. They have certainly enabled the great majority of local authorities to continue with the housing programmes which they consider to be necessary to meet their needs. I understand that the Hartlepools Council was


able to accept tenders for 147 houses during 1972.
Nevertheless, some tenders are higher than can be justified by market conditions alone. In such cases a realistic market allowance may not entirely close the gap between the basic yardstick and the lowest tender. That, in fact, is the position on the Oxford Street scheme.
I do not for one moment minimise the difficult problem to which the local authority must address itself. Should it go ahead making use of the unsubsidised tolerance or should it wait and go out to tender again later?
Whilst fully recognising the difficulty of such a choice for the local authority, I do not believe it would be right for the Department to try to avoid it by giving a market allowance which it believes to be excessive. We have a duty to taxpayers, and we cannot therefore subsidise house building regardless of price.
The Department has offered a market allowance of 15 per cent for the Oxford Street scheme of 45 houses. This took account of recorded increases in house building tender costs in 1972. I am satisfield that the Department has acted reasonably and fairly in this matter. To give more in order to make sure that the scheme might go ahead at once would not mean that more housing work was done in the area. Indeed, it might only result in higher prices for the same volume of work.
As to the future, the Government have formulated strict policies to counter inflation. So far as house building is concerned, the cost of many of the inputs, notably labour and materials, are subject to control. As our measures bite, builders will be in a position to look forward

with greater certainty as regards their costs, and it is reasonable to expect that the general effect will be an earlier return to more stable tendering conditions.
As to the future of the yardstick system itself, I know that there has been a good deal of criticism over the years for various reasons. We keep the arrangements under continuous review and we have invited the local authority associations to let us have their views on how they see the future of cost control in the context of the Housing Act 1972. We shall be studying what they have to say carefully as well as conducting our own review.
I am grateful to the hon. Member for raising this matter. I have taken careful note of what he said. I shall look forward to meeting the deputation from the council and to considering its representations.

Mr. Leadbitter: Will the Minister now take account of the views of these 22 authorities which differ from his opinion?

Mr. Eyre: The hon. Gentleman must understand that he has picked upon certain areas of problems and has paid no regard to the great progress that has been made in this and other regions in getting the house building programme under way.

Mr. Leadbitter: These are the views of the authorities.

Mr. Eyre: I am sorry, but the hon. Gentleman has picked upon the difficult aspects and has not taken account of the areas in which considerable progress has been made.

Question put and agreed to.

Adjourned accordingly at nine minutes to Twelve o'clock.